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OPEC Behaviour Under Falling Prices: Implications For Cartel Stability

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  • Clifton T. Jones
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    Abstract

    The surprising extended decline in real oil prices during the 1980s has raised the question of OPEC's continued viability as a price-setting cartel. In response, Griffin's (1985) tests of alternative hypotheses about OPEC behaviour performed over a period of generally rising prices (1971:1-1983:III) are repeated for the more recent period of falling prices (1983:IV-198R•1V), yielding the same general conclusions: most OPEC members continue to behave in a 'partial market sharing" way, while most non-OPEC oil producers do not. Thus the evidence suggests that recent oil price reductions are more the result of deliberate output adjustments by the cartel than the unintentional outcome of a breakdown in cartel discipline on the way to eventual collapse.

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    Bibliographic Info

    Article provided by International Association for Energy Economics in its journal The Energy Journal.

    Volume (Year): Volume 11 (1990)
    Issue (Month): Number 3 ()
    Pages: 117-130

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    Handle: RePEc:aen:journl:1990v11-03-a06

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    Cited by:
    1. Mohammad Reza Farzanegan & Mozhgan Raeisian Parvari, 2014. "Iranian-Oil-Free Zone and International Oil Prices," MAGKS Papers on Economics 201427, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    2. Khalid Kisswani, 2014. "OPEC and political considerations when deciding on oil extraction," Journal of Economics and Finance, Springer, vol. 38(1), pages 96-118, January.
    3. Dibooglu, Sel & AlGudhea, Salim N., 2007. "All time cheaters versus cheaters in distress: An examination of cheating and oil prices in OPEC," Economic Systems, Elsevier, vol. 31(3), pages 292-310, September.
    4. Elbeck, Matt, 2010. "Advancing the design of a dynamic petro-dollar currency basket," Energy Policy, Elsevier, vol. 38(4), pages 1938-1945, April.
    5. Petter Vegard Hansen & Lars Lindholt, 2008. "The market power of OPEC 1973-2001," Applied Economics, Taylor & Francis Journals, vol. 40(22), pages 2939-2959.
    6. Dahl, Carol & Duggan, Thomas E., 1996. "U.S. energy product supply elasticities: A survey and application to the U.S. oil market," Resource and Energy Economics, Elsevier, vol. 18(3), pages 243-263, October.
    7. Jochen Güntner, 2013. "How do oil producers respond to oil demand shocks?," Economics working papers 2013-11, Department of Economics, Johannes Kepler University Linz, Austria.
    8. Bharati, Rakesh & Crain, Susan J. & Kaminski, Vincent, 2012. "Clustering in crude oil prices and the target pricing zone hypothesis," Energy Economics, Elsevier, vol. 34(4), pages 1115-1123.
    9. Roberto A. De Santis, 2000. "Crude Oil Price Fluctuations and Saudi Arabian Behaviour," Kiel Working Papers 1014, Kiel Institute for the World Economy.
    10. Kaufmann, Robert K. & Bradford, Andrew & Belanger, Laura H. & Mclaughlin, John P. & Miki, Yosuke, 2008. "Determinants of OPEC production: Implications for OPEC behavior," Energy Economics, Elsevier, vol. 30(2), pages 333-351, March.
    11. Rolf Golombek & Alfonso A. Irarrazabal & Lin Ma, 2013. "OPEC's Market Power: An Empirical Dominant Firm Model for the Oil Market," CESifo Working Paper Series 4512, CESifo Group Munich.
    12. Ramcharran, Harri, 2002. "Oil production responses to price changes: an empirical application of the competitive model to OPEC and non-OPEC countries," Energy Economics, Elsevier, vol. 24(2), pages 97-106, March.
    13. Deb, Rahul & Fenske, James, 2009. "A Nonparametric Test of Strategic Behavior in the Cournot Model," MPRA Paper 16560, University Library of Munich, Germany.
    14. repec:hal:wpaper:hal-00818350 is not listed on IDEAS
    15. Yousefi, Ayoub & Wirjanto, Tony S., 2004. "The empirical role of the exchange rate on the crude-oil price formation," Energy Economics, Elsevier, vol. 26(5), pages 783-799, September.
    16. Möbert, Jochen, 2007. "Crude Oil Price Determinants," Darmstadt Discussion Papers in Economics 35713, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute of Economics (VWL).
    17. Reynolds, Douglas B. & Pippenger, Michael K., 2010. "OPEC and Venezuelan oil production: Evidence against a cartel hypothesis," Energy Policy, Elsevier, vol. 38(10), pages 6045-6055, October.
    18. Anton Nakov & Andrea Pescatori, 2007. "Inflation-output gap trade-off with a dominant oil supplier," Banco de Espa�a Working Papers 0723, Banco de Espa�a.
    19. Renaud Coulomb & Fanny Henriet, 2014. "The Grey Paradox: How Oil Owners Can Benefit From Carbon Regulation," PSE Working Papers hal-00818350, HAL.
    20. Alhajji, A. F. & Huettner, David, 2000. "OPEC and other commodity cartels: a comparison," Energy Policy, Elsevier, vol. 28(15), pages 1151-1164, December.

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