OPEC is not a cartel
OPEC behavior is closer to that of an oligopoly than a cartel, which restricts supply and allocates output, because OPEC has never controlled either world supply or consumption. This group of producers has enough strength in the world market, however, to set prices higher than a competitive market price based on marginal costs, and the real question is why they do not lower production and charge still higher prices in order to extend their producing capacity. Saudi Arabia, OPEC's price leader and largest producer, is the moderating force that reflects that country's unique economic role in OPEC. Efforts to model OPEC decision making misunderstand how OPEC is structured and how it operates. The oligopolistic concept, with Saudi Arabia operating as the leading firm, is more appropriate than crediting Saudi Arabia with political moderation or conservatism. 1 table. (DCK)
- Research Organization:
- Israel Inst. of Tech., Haifa
- OSTI ID:
- 5836920
- Journal Information:
- Challenge; (United States), Vol. 24:5
- Country of Publication:
- United States
- Language:
- English
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