Cooperative and Non-Cooperative Behavior of Opec
Cooperative or Non-Cooperative Behavior of OPEC
Is OPEC a classic example of an effective cartel?? What happens to world oil prices when OPEC practices cooperation??
Organization of Petrol Exporting Countries(OPEC)
• Inter-governmental organization formed in 1960 by Iraq, Iran, Kuwait, Saudi Arabia and Venezuela • Currently has 12 members including Qatar Socialist People’s Libyan Arab Jamahiriya ,the United Arab Emirates , Algeria , Nigeria , and Angola .
Objectives of OPEC
To formulate policies in the interest of the member countries.
To regulate the world oil price and avoid harmful fluctuations.
To maximize the profits for the producing countries.
To ensure a healthy return on investments for the firms investing in oil exploration and production in the member countries as well as a regular supply to the customers.
Why study OPEC
OPEC-Annual Statistical Bulletin 2008.
Why Study OPEC?
• 79.3% of proven oil reserve • 51.1% reserves of natural gas • Produces 45.6% of crude oil and 18.5% of natural gas • Accounts for 60.3% of total world crude oil exports • Thus OPEC being a dominant player in the oil industry indeed has assets to influence the market as a cartel
OPEC-Annual Statistical Bulletin 2008.
Evolution of OPEC and its policies
Phase 1(1960-1970) Tax Reforms : • defined the goal of increasing the governments share from 50% to 80% through administrative and tax reforms Phase 2: 1970-1982 Market Fluctuations due to Wars and Nationalization Drive : • worked towards increasing the low oil prices set in from the end of the Second World War. • OPEC official price reached $11.25 per barrel from the $2.18 • influence of multinational companies was greatly reduced - enabled OPEC to sell the oil to customers willing to pay the official price Phase 3: (1982-Current) Individual Production Ceilings : • Individual production ceilings were introduced for the member countries. • A reference basket of oil was introduced which enables
Is OPEC a classic example of an effective cartel?? What happens to world oil prices when OPEC practices cooperation??
Organization of Petrol Exporting Countries(OPEC)
• Inter-governmental organization formed in 1960 by Iraq, Iran, Kuwait, Saudi Arabia and Venezuela • Currently has 12 members including Qatar Socialist People’s Libyan Arab Jamahiriya ,the United Arab Emirates , Algeria , Nigeria , and Angola .
Objectives of OPEC
To formulate policies in the interest of the member countries.
To regulate the world oil price and avoid harmful fluctuations.
To maximize the profits for the producing countries.
To ensure a healthy return on investments for the firms investing in oil exploration and production in the member countries as well as a regular supply to the customers.
Why study OPEC
OPEC-Annual Statistical Bulletin 2008.
Why Study OPEC?
• 79.3% of proven oil reserve • 51.1% reserves of natural gas • Produces 45.6% of crude oil and 18.5% of natural gas • Accounts for 60.3% of total world crude oil exports • Thus OPEC being a dominant player in the oil industry indeed has assets to influence the market as a cartel
OPEC-Annual Statistical Bulletin 2008.
Evolution of OPEC and its policies
Phase 1(1960-1970) Tax Reforms : • defined the goal of increasing the governments share from 50% to 80% through administrative and tax reforms Phase 2: 1970-1982 Market Fluctuations due to Wars and Nationalization Drive : • worked towards increasing the low oil prices set in from the end of the Second World War. • OPEC official price reached $11.25 per barrel from the $2.18 • influence of multinational companies was greatly reduced - enabled OPEC to sell the oil to customers willing to pay the official price Phase 3: (1982-Current) Individual Production Ceilings : • Individual production ceilings were introduced for the member countries. • A reference basket of oil was introduced which enables