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What about the OPEC Cartel?

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  • Daniel Huppmann
  • Franziska Holz

Abstract

The recent decision by the Organization of the Petroleum Exporting Countries (OPEC) not to decrease their output quota in spite of a drastic decline of crude oil prices has brought renewed attention to this supplier group dominating the crude oil market. However, the empirical evidence that OPEC truly acts as a textbook cartel is rather limited. This Roundup summarizes the theories proposed over the past decades to explain the fundamental structure of the crude oil market and the role of OPEC and Saudi Arabia, the pivotal supplier. The consensus in the academic literature points towards the interpretation that the group is acting as a non-cooperative oligopoly. We relate the theories to alternative interpretations of the price drop over the autumn of 2014.

Suggested Citation

  • Daniel Huppmann & Franziska Holz, 2015. "What about the OPEC Cartel?," DIW Roundup: Politik im Fokus 58, DIW Berlin, German Institute for Economic Research.
  • Handle: RePEc:diw:diwrup:58en
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    File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.498387.de/DIW_Roundup_58_en.pdf
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    References listed on IDEAS

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    1. Daniel Huppmann, 2013. "Endogenous Shifts in OPEC Market Power: A Stackelberg Oligopoly with Fringe," Discussion Papers of DIW Berlin 1313, DIW Berlin, German Institute for Economic Research.
    2. Spiro, Daniel, 2014. "Resource prices and planning horizons," Journal of Economic Dynamics and Control, Elsevier, vol. 48(C), pages 159-175.
    3. James L. Smith, 2009. "World Oil: Market or Mayhem?," Journal of Economic Perspectives, American Economic Association, vol. 23(3), pages 145-164, Summer.
    4. Daniel Huppmann and Franziska Holz, 2012. "Crude Oil Market Power—A Shift in Recent Years?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
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    Cited by:

    1. Alberto Behar & Robert A. Ritz, 2016. "OPEC vs US shale oil: Analyzing the shift to a market-share strategy," Cambridge Working Papers in Economics 1623, Faculty of Economics, University of Cambridge.
    2. Behar, Alberto & Ritz, Robert A., 2017. "OPEC vs US shale: Analyzing the shift to a market-share strategy," Energy Economics, Elsevier, vol. 63(C), pages 185-198.
    3. Baumann, Alexendra & Wohlrabe, Klaus, 2019. "Publikationen von Wirtschaftsforschungsinstituten im deutschsprachigen Raum - Eine bibliometrische Analyse
      [Publications of Economic Research Insitutes in the German Speaking Area - A bibliometric
      ," MPRA Paper 92240, University Library of Munich, Germany.
    4. Ansari, Dawud, 2017. "OPEC, Saudi Arabia, and the shale revolution: Insights from equilibrium modelling and oil politics," Energy Policy, Elsevier, vol. 111(C), pages 166-178.
    5. Ansari, Dawud, 2017. "OPEC, Saudi Arabia, and the shale revolution: Insights from equilibrium modelling and oil politics," EconStor Open Access Articles, ZBW - Leibniz Information Centre for Economics, pages 166-178.
    6. Alberto Behar & Robert A Ritz, 2016. "An Analysis of OPEC’s Strategic Actions, US Shale Growth and the 2014 Oil Price Crash," IMF Working Papers 16/131, International Monetary Fund.

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