The world oil market and OPEC behavior: The leak-producer price leader model

Thesis/Dissertation · Fri Jan 01 04:00:00 EST 1988

OSTI ID:5237527

Aboalela, A A

This is an economic study of the world's oil market in which OPEC plays the central role in determining the oil supply and price. Understanding OPEC's behavior is at the core of understanding the world's oil market. However, oil is a resource belonging to the family of natural resources known as exhaustible. We do not produce oil; we only extract and distribute a fixed amount of the resource over generations. Optimal extraction is a matter of concern to both suppliers and consumers. First, it is shown that using the traditional theory of producers behavior in the conventional commodity markets to explain extractors behavior in exhaustible resource markets is completely wrong. Second, current models of OPEC behavior are reviewed. Third, an alternative model is introduced. Previous authors have not directed their models to give explanations to the peculiar observations in oil market. This model divides the world's oil suppliers into: the free riders (non-OPEC oil producers), the OPEC hawks (a group within OPEC) and the leak-producer price leader (Saudi Arabia). Three factors, namely relatively big oil reserves, no other sources of income, and the avoidance of the so-called backstop technology make Saudi Arabia more interested in lower oil prices than are other oil extractors.

• Research Organization: State Univ. of New York, Buffalo, NY (USA)
• OSTI ID: 5237527
• Country of Publication: United States
• Language: English

Related Subjects

02 PETROLEUM
020700* -- Petroleum-- Economics
Industrial
& Business Aspects
29 ENERGY PLANNING, POLICY, AND ECONOMY
290200 -- Energy Planning & Policy-- Economics & Sociology
294002 -- Energy Planning & Policy-- Petroleum
ASIA
ECONOMETRICS
ECONOMICS
ENERGY SOURCES
FOSSIL FUELS
FUELS
FUNCTIONAL MODELS
GLOBAL ASPECTS
INTERNATIONAL ORGANIZATIONS
MARKET
OIL-EXPORTING COUNTRIES
OPEC
PETROLEUM
SAUDI ARABIA