OPEC pricing power : the need for a new perspective

Since the 1973 oil price shock, the history and behaviour of the Organization of Petroleum Exporting Countries (OPEC) have received considerable attention both in the academic literature and in the media.1 Many conflicting theoretical and empirical interpretations about the nature of OPEC and its in...

Full description

Bibliographic Details
Main Author: Fattouh, B
Format: Working paper
Language:English
Published: Oxford Institute for Energy Studies 2007
_version_ 1797053851462795264
author Fattouh, B
author_facet Fattouh, B
author_sort Fattouh, B
collection OXFORD
description Since the 1973 oil price shock, the history and behaviour of the Organization of Petroleum Exporting Countries (OPEC) have received considerable attention both in the academic literature and in the media.1 Many conflicting theoretical and empirical interpretations about the nature of OPEC and its influence on world oil markets have been proposed. The debate is not centred on whether OPEC restricts output, but the reasons behind these restrictions. Some studies emphasize that production decisions are made with reference to budgetary needs which in turn depend on the absorptive capacity of the domestic economies (Teece, 1982). Others explain production cuts in the 1970s in terms of the transfer of property rights from international oil companies to governments which tend to have lower discount rates (Johany, 1980; Mead, 1979). Others explain output restrictions in terms of coordinated actions of OPEC members. Within the literature, OPEC behaviour ranges from classic textbook cartel to two-block cartel (Hnyilicza and Pindyck, 1976), to clumsy cartel (Adelman, 1980), to dominant firm (Salant, 1976; Mabro, 1991), to loosely co-operating oligopoly, to residual firm monopolist (Adelman, 1982) and most recently to bureaucratic cartel (Smith, 2005). Others have suggested that OPEC oscillates between various positions but always acts as a vacillating federation of producers (see for instance Adelman, 1982; Smith, 2005). The existing empirical evidence has not helped narrow these different views. Griffin’s (1985) observation in the mid-1980s that the empirical studies tend to “reach onto the shelf of economic models to select one, to validate its choice by pointing to selected events not inconsistent with model’s prediction” still dominates the empirical approach to studying OPEC behaviour and its pricing power.
first_indexed 2024-03-06T18:49:20Z
format Working paper
id oxford-uuid:0fa63c3e-b5c7-4147-bae8-26e54e9438e0
institution University of Oxford
language English
last_indexed 2024-03-06T18:49:20Z
publishDate 2007
publisher Oxford Institute for Energy Studies
record_format dspace
spelling oxford-uuid:0fa63c3e-b5c7-4147-bae8-26e54e9438e02022-03-26T09:52:17ZOPEC pricing power : the need for a new perspectiveWorking paperhttp://purl.org/coar/resource_type/c_8042uuid:0fa63c3e-b5c7-4147-bae8-26e54e9438e0EnglishOxford University Research Archive - ValetOxford Institute for Energy Studies2007Fattouh, BSince the 1973 oil price shock, the history and behaviour of the Organization of Petroleum Exporting Countries (OPEC) have received considerable attention both in the academic literature and in the media.1 Many conflicting theoretical and empirical interpretations about the nature of OPEC and its influence on world oil markets have been proposed. The debate is not centred on whether OPEC restricts output, but the reasons behind these restrictions. Some studies emphasize that production decisions are made with reference to budgetary needs which in turn depend on the absorptive capacity of the domestic economies (Teece, 1982). Others explain production cuts in the 1970s in terms of the transfer of property rights from international oil companies to governments which tend to have lower discount rates (Johany, 1980; Mead, 1979). Others explain output restrictions in terms of coordinated actions of OPEC members. Within the literature, OPEC behaviour ranges from classic textbook cartel to two-block cartel (Hnyilicza and Pindyck, 1976), to clumsy cartel (Adelman, 1980), to dominant firm (Salant, 1976; Mabro, 1991), to loosely co-operating oligopoly, to residual firm monopolist (Adelman, 1982) and most recently to bureaucratic cartel (Smith, 2005). Others have suggested that OPEC oscillates between various positions but always acts as a vacillating federation of producers (see for instance Adelman, 1982; Smith, 2005). The existing empirical evidence has not helped narrow these different views. Griffin’s (1985) observation in the mid-1980s that the empirical studies tend to “reach onto the shelf of economic models to select one, to validate its choice by pointing to selected events not inconsistent with model’s prediction” still dominates the empirical approach to studying OPEC behaviour and its pricing power.
spellingShingle Fattouh, B
OPEC pricing power : the need for a new perspective
title OPEC pricing power : the need for a new perspective
title_full OPEC pricing power : the need for a new perspective
title_fullStr OPEC pricing power : the need for a new perspective
title_full_unstemmed OPEC pricing power : the need for a new perspective
title_short OPEC pricing power : the need for a new perspective
title_sort opec pricing power the need for a new perspective
work_keys_str_mv AT fattouhb opecpricingpowertheneedforanewperspective