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Gains from Cartelisation in the Oil Market

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Author Info
Elin Berg, Snorre Kverndokk and Knut EinarRosendahl (Statistics Norway)

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Abstract

In this paper we ask whether OPEC still gains from cartelisation in the oil market despite low producer prices and a modest market share. We apply two intertemporal equilibrium models of the global oil market; one consisting of a cartel and a fringe, and one describing a hypothetical competitive market. Comparing the outcome of these models we conclude that there are positive cartelisation gains of about 18 per cent in the oil market. In comparison with what Pindyck (1978) found for the 1970s this may be considered as quite modest. Moreover, we study whether the cartelisation gains to OPEC are altered by different moves by non-OPEC producers or consumer countries. Generally, we find that the relative cartelisation gains are unchanged. One exception is exploration activities, where we find that a major increase in non-OPEC reserves could remove the cartelisation gains to OPEC completely. In this case, the OPEC-countries could find themselves better off without the cartel.

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Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 181.

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Date of creation: Oct 1996
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Handle: RePEc:ssb:dispap:181

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Related research
Keywords: Cartelisation Gains; Petroleum Wealth; Exhaustible Resources.;

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Find related papers by JEL classification:
Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General
Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Elin Berg, Snorre Kverndokk and Knut Einar Rosendahl, 1996. "Market Power, International CO2 Taxation and Petroleum Wealth," Discussion Papers 170, Research Department of Statistics Norway.
  2. Manne, Alan & Mendelsohn, Robert & Richels, Richard, 1995. "MERGE : A model for evaluating regional and global effects of GHG reduction policies," Energy Policy, Elsevier, vol. 23(1), pages 17-34, January. [Downloadable!] (restricted)
  3. Salant, Stephen W, 1976. "Exhaustible Resources and Industrial Structure: A Nash-Cournot Approach to the World Oil Market," Journal of Political Economy, University of Chicago Press, vol. 84(5), pages 1079-93, October. [Downloadable!] (restricted)
  4. Pindyck, Robert S, 1978. "Gains to Producers from the Cartelization of Exhaustible Resources," The Review of Economics and Statistics, MIT Press, vol. 60(2), pages 238-51, May. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Weiyu Gao & Peter Hartley & Robin Sickles, 2009. "Optimal dynamic production from a large oil field in Saudi Arabia," Empirical Economics, Springer, vol. 37(1), pages 153-184, September. [Downloadable!] (restricted)
  2. Sverre Grepperud, 1997. "Soil Depletion Choices under Production and Price Uncertainty," Discussion Papers 186, Research Department of Statistics Norway. [Downloadable!]
  3. Lars Lindholt, 1999. "Beyond Kyoto: CO2 permit prices and the markets for fossil fuels," Discussion Papers 258, Research Department of Statistics Norway. [Downloadable!]
  4. Elin Berg, Snorre Kverndokk and Knut Einar Rosendahl, 1999. "Optimal Oil Exploration under Climate Treaties," Discussion Papers 245, Research Department of Statistics Norway. [Downloadable!]
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