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OPEC: What Difference Has It Made?

Author

Listed:
  • Bassam Fattouh

    (Oxford Institute for Energy Studies, Oxford OX2 6FA, United Kingdom
    School of Oriental and African Studies (SOAS), University of London, London WC1H 0XG, United Kingdom)

  • Lavan Mahadeva

    (Oxford Institute for Energy Studies, Oxford OX2 6FA, United Kingdom;)

Abstract

The main purpose of this paper is to review the evolution of OPEC models and to link this evolution to some key events in the oil market. Our main conclusion is that OPEC’s pricing power varies over time. In many instances, OPEC can lose power to limit oil price movements in either direction. Such changes in pricing power are induced by market conditions and can occur in both weak and tight market conditions. Because of OPEC’s varying conduct, there is not a single model that fits OPEC behavior. Hence analysts have been forced to choose from a wide range of models to explain certain episodes. The empirical literature has not been successful in distinguishing between the various competing models, as these models offer very similar predictions.

Suggested Citation

  • Bassam Fattouh & Lavan Mahadeva, 2013. "OPEC: What Difference Has It Made?," Annual Review of Resource Economics, Annual Reviews, vol. 5(1), pages 427-443, June.
    • Handle: RePEc:anr:reseco:v:5:y:2013:p:427-443
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    File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev-resource-091912-151901
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    Keywords

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    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • 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

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