Mostly
summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.
PART 5 Firm Behavior and the Organization of Industry
Chapter 17 of 36 - Oligopoly
Section 11 of 23
…
Much of the world's oil is produced by
a few countries.
These countries make up an oligopoly.
Their decisions about quantity of oil
to pump and supply are the same as Jack and Jill's decisions about water.
In 1960 an oil-producing countries
cartel was formed, the Organization of Petroleum Exporting Countries (OPEC).
Original members included Iran, Iraq,
Kuwait, Saudi Arabia, and Venezuela.
By 1973 these others had joined: Qatar,
Indonesia, Libya, the United Arab Emirates, Algeria, Nigeria, Ecuador, and
Gabon.
…
The OPEC countries have about three quarters
of the world's oil reserves.
OPEC, acting as an oligopoly tries to
control the price of oil with coordinated limiting of quantity produced by setting
production levels for each of the member countries.
The problem OPEC has is the same as with
Jack and Jill: each cartel member is tempted to raise its production to increase
its own profit.
OPEC members repeatedly agree to reduce
production, but then cheat on their agreements.
…
OPEC was most successful maintaining
cooperation and high prices from 1973 to 1985.
The price of crude oil rose from $3 a
barrel in 1972, to $11 in 1974, and to $35 in 1981.
In the mid-1980s member countries began
disagreeing about production levels and OPEC became less effective at
maintaining cooperation.
By 1986 the price of crude oil had
fallen back to $13 a barrel.
…
The members of OPEC continue to meet,
but the cartel has been less successful at reaching and enforcing agreements.
The lessened cooperation among OPEC
nations has reduced oil prices benefitting consumers worldwide.
… …
benefitting consumers worldwide
sekai shōhisha ni onkei o ataeru
世界消費者に恩恵を与える
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