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An Investigation into the Incompatibility of Economic Models of OPEC’s Behaviour in the Long-run from the Point of View of the Evolution in the Crude Oil Market and the Basic Features of This Organization
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Mastaneh Jamshidi Rudbari *   |
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Abstract: (17563 Views) |
| Most models developed during the past 30 years to explain OPEC’S behaviour have addressed this issue only from a mathematical point f view and within the framework of microeconomics. In this paper, the economic models of OPEC’s behaviour are introduced and the performance of this organization is examined by using these models. The results show that any of the said models can explain OPEC’s behaviour in the short-run but the explanation of OPEC’s behaviour in the long-run may not be possible due to factors such as the followings: structural change in the global oil market during the 48 years of OPEC’s life (e.g. diminishing the monopolistic power of oil companies, non-OPEC supplies and the resulting demand fall in OPEC’s oil, the collapse of the Soviet :::union:::, and the reduced level of excess production capacity), economic and political instability in the five major oil producers of crude oil in the Persian Gulf countries (Iran, Saudi Arabia, Kuwait, Iraq, and UAE), which may adversely affect OPEC’s performance. Moreover, in the long-run, the heterogeneity of OPEC member countries has been responsible in the failure of purely economic models to explain OPEC’s behaviour. It may be possible to explain OPEC’s behaviour in the long-run by the utilization of combined economic models of OPEC’s behaviour taking into account the political and economic conditions of OPEC’s major producers as well as the conditions of oil reserves and the production capacity forecasts in countries holding the main oil reserves. |
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| Keywords: Economic Models of OPEC’s Behaviour, OPEC’s Performance, Structure of the Global Oil Market, OPEC’s Characteristics |
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Full-Text [PDF 434 kb]
(3933 Downloads)
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Type of Study: Research |
Subject:
General
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