Cartels never last. In an interesting coincidence, the Organization of Petroleum Exporting Countries' latest flirtation with cartel behavior ends just as a much more-durable cartel unravels.

Cartels never last. In an interesting coincidence, the Organization of Petroleum Exporting Countries' latest flirtation with cartel behavior ends just as a much more-durable cartel unravels.

The products differ, but the circumstances have much in common.

The durable but unraveling cartel is the De Beers diamond operation. Since the Great Depression of the 1930s, the South African company has bought and hoarded all rough diamonds surplus to demand. It thus kept diamond prices higher than they would have been if the stones had remained for sale.

De Beers was able to maintain this role because it controlled more than 60% of the market for uncut diamonds.

But the strategy turned against itself. Cartel strategies always do.

For any commodity, elevated prices attract new supply. In the case of diamonds, much of the new supply now comes from unlicensed mines in Africa, proceeds of which fund several of the continent's wars.

So De Beers has a public relations problem. Sensitive jewelry buyers don't like gems with potentially bloody backgrounds.

What's more, De Beers shareholders have turned restive. Especially when inflation is low, there are more-profitable uses for capital than deliberately unsold inventory.

As a result of all this, De Beers, according to a three-part series in the Financial Times, has decided to change strategies. It no longer will act as buyer of last resort in the diamond trade. And it will police the market in an effort to curtail sales of stones likely to fund weapon purchases by African warlords.

It also will sell its inventoried diamonds. To prevent a market crash, it will try to boost demand with an aggressive advertising campaign.

Demand for diamonds will no doubt increase. But the reason won't be a marketing blitz. What can advertising do to make diamonds more attractive than they already are to people of means conditioned to see them as tokens of personal elegance?

Demand will increase because, whatever exertions De Beers undertakes to the contrary, prices will fall. Diamonds will still be precious. They just won't be as precious as they used to be.

While De Beers made cartel behavior work for 65 years, OPEC managed it most recently for a little over a year. Before that, its efforts to enforce price targets with production restraint were only rarely successful and then only fleetingly so.

Over time, OPEC has managed to keep crude prices above the marginal cost of production. But competition, both internal and external, has kept it from managing price to anywhere near the degree to which De Beers did for so long. As cartels go, OPEC has been no sparkling triumph. Most of the time, it doesn't even function as a cartel in the classic sense.

The reason is clear enough why De Beers lasted 6 decades as a cartel and OPEC can't go longer than a year. De Beers is a monopoly and, until shareholders balked at the strategy, doesn't have the enforcement challenges OPEC always faces. And De Beers controls proportionally more of the market for diamonds than OPEC does that for oil.

Several of the De Beers problems, however, are familiar to OPEC: competition stimulated by prices held high by supply management, the need to adapt to fluctuations in the rate of inflation, and a product with growing problems in the area of popular acceptability.

A major distinction deserves notice, however.

Cartel behavior in the oil market, however short-lived, is consummately evil in the public's view. There was never much uproar over the De Beers cartel. And as diamond prices fall, diamond owners concerned about value of their jewelry will look back at the cartel decades as the good old days.

With oil, people will quit worrying about OPEC's cartel behavior when oil prices fall. And oil prices will fall. The De Beers record tells why: Cartels never last. Some just last longer than others.

More in Pipelines & Transportation