OPEC and the price of oil: cartelization or alteration of property rights

Journal Article · · J. Energy Dev.; (United States)

OSTI ID:5423283

Johany, A D

The price of oil, it is argued, would have risen independently of the 1973 cartelization of the Organization of Petroleum Exporting Countries (OPEC) if the individual producers had set their own production rates and market prices. While world attention focused on the 1973 oil embargo, a de facto nationalization of crude oil deposits reduced the oil companies to the role of contractors and had a more significant impact on world oil prices than cartelization. The price increase is shown to have decreased the OPEC producers' discount rates as well as increasing revenues. This led to output reductions and maintained the high prices. The economic analysis further argues that OPEC has not followed the theories applied to cartels because it is not a true cartel in the sense of having eliminated competition. Property rights were changed instead, which affected the long-run costs of supplying oil. Oil prices could be brought down if the consuming countries made OPEC foreign investment more secure, but the legislation to do so would raise OPEC discount rates and encourage a faster rate of production. 13 references, 1 figure. (DCK)

• Research Organization: Univ. of Petroleum and Minerals, Dhahran, Saudi Arabia
• OSTI ID: 5423283
• Journal Information: J. Energy Dev.; (United States), Journal Name: J. Energy Dev.; (United States) Vol. 5:1; ISSN JENDD
• Country of Publication: United States
• Language: English

Related Subjects

02 PETROLEUM
020700 -- Petroleum-- Economics
Industrial
& Business Aspects
29 ENERGY PLANNING, POLICY, AND ECONOMY
294002* -- Energy Planning & Policy-- Petroleum
CARTELS
COMPETITION
ENERGY SOURCES
FOSSIL FUELS
FUELS
INTERNATIONAL ORGANIZATIONS
OIL-EXPORTING COUNTRIES
OPEC
PETROLEUM
PRICES
PRODUCTION
PROPERTY RIGHTS