Opec And Other Opec Styled Cartels Economics Essay

The aim of this paper is to confer a emend consequence encircling cartels by giveing the universe’s biggest and most cogent cartel the Structure of Petroleum ship-produceing Countries and other knots of countries that representation the ability of OPEC nonproductioned to originate aapprove structures to maximize their economic goods from ship-produces. The diatribe analyses the obscureies of elucidation up such structures, the irrelevant reactions, the interior challenges of exoteric it consequenceantly of the attention contrarietys of dissects and in some conditions the spiritual doubts haughty aggravate a cartel. It exhibitions how abundant mode accept to be in locate for a cartel to imagine economic service or to curiosity-behalf universe appraisements.

The Truth of the Structure of Petroleum Exporting Countries

The Structure of Petroleum Exporting Countries was causeed in 1960. The aim of the structure is to surrender the economic attention of its dissects.

Before the establishment of this structure in the 1950s a so named posted appraisement scheme was in locate betwixt intercollective oil companies (IOCs) and synods. Under this scheme synods could consider in pace the gross of taxes remunerated by oil companies. However posted appraisements were unroving suitableness oil appraisements were doubtable. Succeeding permanent to these provisions for approximately a decade economic and financial exigency at-last forced intercollective oil companies to diminish posted appraisements in 1959. Their unilateral enjoyments haughty objections from synods.

The establishment of OPEC

Representatives of oil-exporting countries met succeeding in 1959 at the earliest Arab Oil Congress. Their aim was to concoct enjoyments aggravate oil companies. However combination betwixt the countries was made obscure by the structural contrarietys betwixt their oil industries. To-boot the structural contrarietys collective contrarietys aggravate cannonade and origination shares made the job of the conclave contrivancee grade obscure. The rivalry betwixt the dissects was telling in the contest betwixt Venezuela and Middle Eastern ship-produceers. These variance betwixt oil-exporters remaindered in the need of the earliest strive to institutionalize coordination.

Not crave succeeding the earliest unlucky strive another appraisement cut by the intercollective oil companies made five oil ship-produceing-countries (Venezuela, Saudi Arabia, Iran, Iraq, Kuwait) to put separately their variances and exstiffness their bargaining agency through suspend combination in ordain to surrender their economic attention. As a remainder in 1960 the Structure of Petroleum Exporting Countries was normal and their very earliest enjoyment was to progeny a assertion pursuit for the amends of posted appraisements to their give 1959 contrivancees. To-boot this they as-courteous demanded the stabilization of oil appraisements by the coerce of origination.

The direct ten years passed delay the contest betwixt OPEC and IOCs. The United States’ synod did not avow OPEC and forbade domiciliary oil companies to do duty delay the structure. Furthergrade the U.S. synod imposed sanctions at the cost of OPEC dissects in ordain to bung other countries from attachment the structure. As a remainder IOCs sensation empowered by the U.S. aid holdd their practices of intercourse delay army synods partially to lower their bargaining agency. However OPEC firm to receive enjoyments by promising dissect specifys to obtain any peel of service they can on their own which succeeding can be used by others as a antecedent during negotiations. This tactic accelerationed OPEC dissects to exstiffness their contrivancee of bargaining stalk by stalk and in ten years they considerably extensiond their oil revenues as courteous. The structure instituted to behove interpolitically acknowledged and new countries instituted to link their ranks.

By the 1970s OPEC became so auspicious that they could act as a cartel and set accept a secure consequence on oil appraisements. In 1973 during the Arab-Israel war granted the unconcealeding to receive coerce aggravate unfinished oil pricing.

The challenges faced by OPEC

After entrance the coerce aggravate oil pricing the structure faced twain exterior and inner challenges. Earliest of all the United States was not succeeding at all delay their secure agency which made it approvely for OPEC to consequence universe economics through oil appraisements. The U.S. in relationship delay other oil-importing countries waged a vocal war aggravate the structure and prisoner them of causing a universewide economic behind a suitablenessdraw. To-boot the exterior challenges the dissects of the structure had great variances aggravate OPEC’s temporization. This was caused by the structural contrarietys of the dissect specifys. Suitableness countries such as Saudi Arabia delay diminutive population and great oil reserves nonproductioned to set low appraisements to determine crave account demand for unfinished oil other countries delay diminutive reserves and big population such as Algeria lobbied for haughty oil appraisements to maximize their deficient account revenues in ordain to aid their domiciliary crop programs. There were some countries who to-boot having haughty reserves favored haughty appraisements for the corresponding crop reasons. Examples for these are Iran and Libya.

The downturn of their superiority

The trepidation from oil deficientages during the shape in Iran, one of the biggest OPEC dissects, caused a demoralization buying at the end of the 1970s. The demand for oil was so big that appraisements doubled in one year. Great exstiffness in appraisements during the demoralization concoct new hawkers to the dispense. At the extensiond appraisement contrivancee it was meritsuitableness perpetrationing oil reserves in the North Sea. As new entrants exhibitioned on the dispense oil tenorers deputed OPEC oil delay that of the new entrants consequenceantly of the instconducive Middle Eastern dispenses.

OPEC experienced to cling its agencyful foundation and accommodate to the new predicament by introducing a so named oil origination sharing temporization. Delay this temporization they nonproductioned to coerce oil appraisements by masterful oil contribute. As dissect of the temporization a free origination-sharing contrivance was introduced in 1982. This had no restraining agency on OPEC dissects and the synods, each driven by their own attention, did not suit to the free coerces. Representation the incompetence of the free scheme a mandatory quota scheme was introduced in 1983. This remaindered in the diminish of oil appraisements for the earliest space in approximately 15 years. OPEC dissects desired that in this way they can exstiffness consumer demand.

However the quota scheme was not irresponsible of flaws and insipiditys. For illustration Ecuador firm to liberty the structure in ordain to forsake obligations set by the scheme contrivancee on diminutive principles. But not metrust diminutive principles were confern a inexplicconducive space by the quota scheme. OPEC’s biggest principle, Saudi Arabia, apparent the scheme as society an ungrateful slavery on the province’s predominant hues and refused to rest the rules. By not entrance dissect in the quota scheme the Saudis were not conducive to observe regular origination grosss and they had to depute their origination quantities periodically installed on the retaining demand that was left succeeding other dissects sold the gross clear in the quota conformity.

The pose of dangle principle was very unfavorconducive for Saudi Arabia consequenceantly in condition of a lower in demand they had to lower their origination grade than the other dissects.

This was unaffordconducive for their dispensation which was heavily relative on the allowance generated by oil ship-produces. Finally in 1986 Saudi Arabia firm to inaugurate their origination owing metrust their domiciliary needs. The remainder was a lower in universe oil appraisements.

Cracks in the structure caused by collective contrarietys

Political stiffness delayin the structure was give correct from the unconcealeding and telling during the earliest Gulf War. The contest betwixt Iraq and Iran during most dissect of the 80’s divided the structure so plenteous that there was a subject-stuff when they couldn’t consort on a new secretary-general. Meetings during this space were so armyile that the usefulness of the structure was considerconducive diminishd.

The end of the earliest Gulf War implied desires that contest delayin the structure may be fixed. However the pacification did not lasted for crave as Iran invaded Kuhold in 1990 and the structure became incogent repeatedly.

Over origination has been a consecutive bearing for the structure. Some dissect specify (e.g. Venezuela, Nigeria, Iraq, Indonesia) use their inner collective insubordination and consequenceant disruptions in oil contribute to blink their aggravate origination.


As a misrecord it can be said that OPEC, the universe biggest cartel, has been struggling to coerce the intercollective oil dispense consequenceantly of its need to coordinate and auspiciously coerce the air of its dissects. Furthergrade they are confrontment regular challenges to their superiority which has been decreasing gone the 80’s.

Oil, to-boot society very-abundant profitconducive to hawk is one of the most great strategic piions, is sought at all dissects of the universe and as the appraisement flows grade and grade rooms behove merit to perpetration. Succeeding the decline of the Soviet Union, Central Asian countries tempted irrelevant investors to pursuit and perpetration their oil and gas rooms. This originated grade exigency on OPEC and its appraisement structure. In an strive to frequent up delay the challenging environment dissects instituted to unconcealed their dispenses to FDI and let Intercollective Oil Companies in their countries.

However the biggest need of OPEC dissects is that they accept failed to patent clear other rooms of their dispensation. They accept not free a temporization to for the coming when they succeed not be conducive to lean on the revenues generated by oil ship-produces. As crave as the demand for oil is regular and appraisements are haughty their economies are secured but their succeedingwards they may invent their selves in an very-abundant obscure predicament

Until synods and the notorious concentrates exclusively on oil pricing they won’t be conducive to separate psychological and financial piionss to raise other dissects of their toil such as the repursuit and crop or the usage of deputenative courage sources. Delay concerns encircling global warming and taint consumers are encouraged to modify their preferences to new courage piionss.

OPEC dissects’ extravagant trust on revenues generated by oil libertys their dispensation vulnerconducive to modifys and collective contests.

Other OPEC fashiond cartels

The Asian rice cartel

On May 1, 2008 the original-rate attend of Thailand, Samak Sundaravej, announced in Bangkok that the Thai synod would try to link equal rice-producing countries, Vietnam, Cambodia, Myanmar and Laos, in a cartel dissectnership to imagine tenorant coerce aggravate the intercollective appraisements of the ware.

“We don’t aspire to be approve OPEC, but we desire to be upfair a knot of five to acceleration each other in trading rice on the universe dispense,” said Mr. Samak in a fame confern to The Nation newspaper. (http://www.nytimes.com/2008/05/01/business/worldbusiness/01cartel.html)

Thailand, the universe’s extensivest rice ship-produceer, for abundant years has been believeing encircling creating a cartel aapprove to OPEC to bias the appraisement of flow delay the acceleration of its dominant pose, upfair approve OPEC dissects do.

“Though we are the living centre of the universe, we accept had tiny bias on the appraisement,” a synod spokesman said. “With the oil appraisement preferment so plenteous, we tenor rich oil but hawk rice very cheaply and that’s trickish to us and grieves our employment counteract.” (http://www.nytimes.com/2008/05/01/business/worldbusiness/01cartel.html)

However if the nations are auspicious in their strive to originate a cartel that would accept relevant consequences on the rice dispense by frequenting appraisements at their present peak and deepening the living emergency that has hit the deficientest inhabitants of Thailand and other deficient Asian herd.

Large-scale rice principles and ship-produceers in Thailand and Vietnam would good considerably if haughty appraisements would cling as they are, but for other locates that accept a burdensome trust on tenored rice such as Singapore, Hong Kong and the Philippines it would be an alien scenario. Inrelative from irrelevant reactions the Thai synod can lean on the aid of the farmers from countrified areas of the province who see an unconcealeding in a approvely cartel.

While abundant countries are affianced in trading corn, wheat and other grains, rice is proper by metrust a few countries. Plane though China, India and Indonesia are the extensivest principles they combined population excel 2.5 billion. As a remainder they can balean bestow to ship-amount any of the rice they amount. On the other operative Thailand is in a very lucky pose. Thai farmers who accept rooms in prodigious, exuberant deltas are conducive to outdevelopment 3 or 4 spaces a year. As a remainder Thailand is the extensivest ship-produceer of rice, ship-produceing 10 pet tons a year. The obstruct is Vietnam, ship-produceing 5 pet tons a year, and the third is the United States, ship-produceing 3.5 pet tons.

The flaws of the contrivance

However it seems that a rice cartel, specially an ASEAN rice cartel could not be as dominant as its dissects would approve. Plane though Thailand is the biggest ship-produceer in the universe its contrivance to cause a cartel would not embody the obstruct and third biggest rice ship-produceer in the universe (India and U.S.). It is inexplicablely believconducive that these two countries and abundant others left out of a immanent cartel would upfair hold and wake suitableness Thailand is fixing the appraisements. A big contrariety betwixt rice and oil is that rice is renewable. As a remainder if a cartel was causeed it would be metrust a doubt of space antecedently alienly curiosity-behalfed countries would effort out methods to exstiffness their yields or some other countries would exhibition on the dispense delay either rice or a depute pi. Another bearing for a immanent cartel would be that unapprove oil, rice is perishconducive and they could not bestow to frequent reserves or delayhold stocks for economic or appraisement elucidation reasons. Furthergrade it would be very-abundant obscure for the structure to manipulate amount. Suitableness OPEC deals delay a diminutive calculate of extensive principles, rice is amountd by abundant diminutive farmers and consequenceantly of the modifyful latitude rice yields cannot be pre considerd. Finally, upfair approve in the condition of OPEC, the immanent dissects of a rice cartel accept divergent contrivancees of crop and in some conditions divergent economic and collective schemes.

Even though there are a lot of barriers and pitfalls to a immanent rice cartel the progeny quiet has been haughty consequenceantly it would adduce great financial goods to dissects, grade collective agency to the synods and electoral agencys to dissecties mound the progeny during the elections.

The spiritual of a cartel

The approvely myth of a cartel and the global appraisement of rice is not upfair a collective progeny but a humanitarian as courteous. Suitableness the cartel of the OPEC countries has melean an economic and financial consequence on herd, a approvely rice cartel that frequents appraisements incessantly haughty can accept society a changing consequence on hundreds of pets of herd for who rice is the metrust bestowconducive living.

Another great progeny is the direction of misrecord in these very deficient countries. The metrust way out from destitution for these herd is direction. However great it is for misrecord to go to initiates incessantly most families cannot bestow to let their infantine ones to initiate consequenceantly all acceleration is needed at settlement to put bigwig to eat on the tconducive at the end of the day. That is why some countries approve Cambodia came up delay the consequence of giving breakfast to students in ordain to tempt them to initiate. The rice interests at the unconcealeding of the initiate day are such a big acceleration for the families that they are succeedingly granting their misrecord and students are blithesome to tramp divers miles a day for a interest of rice.

“Most of the students following to initiate for the breakfast,” said Taoch Champa, a 31-year-old professor. (http://www.nytimes.com/2008/04/30/world/asia/30cambodia.html?_r=1&ref=worldbusiness)

The breakfast program was an twinkling hit in Cambodia when it was introduced in 2007. To-boot increasing furniture the prointerest of girls has extensiond as courteous and sluggishness ceased to ahold consequenceantly of the antecedently assort living division. Furthergrade courteous-fed students achieved emend remainders. But the evasion living appraisements (specially the appraisement of rice) puts the gross scheme in peril. The budget of these initiates is so compact that they metrust cannot bestow to hold the breakfast program if the appraisement of rice clings haughty. Delay the myth of a cartel living the gross program would accept to be hanging indefinitely in Cambodia and some other countries that won’t be dissect of the structure. Deficient Cambodian herd are so practiced to living deficientages that they can subsist on a insufficient poverty of sustentation. Now if the program collapses faciles say that there is no hazard of inanition unarranged misrecord but deficient families metrust cannot bestow to grant their misrecord to initiate, instead they accept to go to the woods to infer living.

“The rice cartel top”

Not crave succeeding the consequence was originated the employment officials of ASEAN nations converge in Bali to examine the stuff. At this convergeing a determination was made to obstruct. Under combination they balance to effort on stabilizing global rice appraisements suitableness at the corresponding space securedguarding ship-produces. Furthergrade their aim is to invent ways to exstiffness output in the crave run. Succeeding the convergeing Indonesia’s employment attend, Mari Pangestu, ask-fored that they accept avowd the tenorance of having stconducive appraisements and an conformity was thrusted to hold spotless employment practices. To-boot the abundant conformitys, nations failed to following up delay any measures to decorations increasing rice appraisements in the deficient account. This need is down circumstance that it is obscure for countries delayin the structure to effort out disruptions for regional bearings of-late.

As a misrecord succeeding the top it can be said that some ASEAN countries nonproduction a rice cartel suitableness others don’t. The disruption of the structure for this bearing was to intimate combination for its dissects. However they accept not laid any rules to this combination which is now down to the countries to construe. Delay no embodied measures receiven the progeny does not hold on cubic establishments at all.

The Gas Cartel

Early phases

The Gas Exporting Countries Forum, GECF, was normal in Teheran in 2001. It has 16 dissects, all superior gas ship-produceers, approve Russia, Qatar, Nigeria, Algeria. This knot has been extensively rough, contrivancee though Russian superintendent at that space Vladimir Putin was owing the causeation of a secureer relationship gone the very unconcealeding. He had to hold until the Doha convergeing, in 2007, where the progeny of a secure relationship and combination betwixt dissects was haughty. Members saw an unconcealeding in the increasing demand for gas (Paris installed Intercollective Courage Agency forecasted that the demand for gas succeed become annually by 2% until the year 2030) accompanied delay decreasing oil amount.

The determination of GECF dissects, who amount environing 60% of the universe’s gas ship-produces, to set up a committee delay the job of studying and analyzing pricing policies haughty superior concerns from countries environing the universe who saw this seek as a stalk towards the myth of an OPEC fashiond cartel that could reshape the global courage dispense. The European Union, a superior Russian gas tenorer, was unarranged the earliest the to breast the seek of the GEFC.

The gas and the oil dispense dissent from each other in a lot of aspects. Experts ask-for that such a agencyful gas cartel as the OPEC has been would be obscure to set up consequenceantly there isn’t such a big demand for gas from all dissects of the universe than there is for oil. Another dignity is that gas is not employmentd on the unconcealed dispense approve oil is but installed on shapeual conformitys betwixt dissecties. The insipidity of these conformitys is that appraisements are set in pace for some years holding on the shape. Currently gas is raptureed through pipelines, which obstructs the becometh of the dispense. But a new technology succeed enconducive dealers to rapture gas in a liquefied cause that is frozen, unconcealeding up new raptureation modes.

The trepidations of superior gas tenoring countries

The dissects of the European Union, countries that hold on Russian and Algerian gas, accept seculean breastd an relationship specially if it turns into a appraisement determining cartel. To-boot the EU, Americans accept as-courteous haughty their concerns. They accept been accusing Moscow of using its courage piionss as a machine to reimagine some of its intercollective agency. As it can be seen in the condition of OPEC, cartels are not upfair encircling economics. Some of the dissects can reap geocollective superiority as courteous and Russia expects upfair that from a gas cartel. The trepidations of the EU and the U.S. are installed on antecedent Russian enjoyments, when they cut off gas contribute to other countries during the space of winter in ordain to accept bigger bargaining agency and thrust favorconducive conformitys during negotiations.

The myth of the gas cartel

By 2009 elplane well-balancedtual gas ship-produceers, Algeria, Bolivia, Egypt, Equatorial Guinea, Iran, Libya, Nigeria, Qatar, Russia, Trinidad and Tobago, and Venezuela, all dissects of the GECF, accept causeed a cartel. A Russian courage facile was elected to be the earliest secretary of the cartel. But it quiet sweepings to be seen how cogent they can be consequenceantly abundant GECF dissects lean on FDI to educe their well-balancedtual gas industries and so they won’t consort on determinations that may grieve their customers.

The obstruct bearing is the better mentioned raptureability. Unapprove oil, gas cannot be poured into a container and shipped contrivancee to the furthest dispense. It is raptureed via pipeline schemes that demand billions of dollars of cannonade to set up. These mode bind obstruct gas ship-produceers to regional dispenses. That is why for illustration European and Japanese gas appraisements exceedingly dissent. Suitableness OPEC can exstiffness the universe appraisement of oil by reducing the daily output a gas cartel does not accept such a agency. Gas ship-produceer can curiosity-behalf metrust their regional dispense. They don’t accept bigger appraisement elucidation agency synthetically than they accept partially. For illustration if Russia nonproductions to impeach The Ukraine grade, attachment forces delay Bolivia succeed not acceleration him at all.

However if gas ship-produceers would link forces regionally they could accept the agency to coerce dispenses. For illustration in the condition of the EU if Russia would coact delay Norway and Algeria they could coerce approximately 100% of the European well-balancedtual gas dispense.



Even the OPEC which has been the most auspicious cartel in new truth has past some of its agency in the new decades. As it can be seen in the diatribe the other two OPEC fashion cartels accept considerconducive less favorconducive mode than OPEC has or had. Consequently of this their agency can be doubted correct from the unconcealeding. As a misrecord I believe that these illustrations exhibition us that the universe dispensation has so abundant dissecticipants who accept a lot of divergent services aggravate each other that it is very-abundant obscure, if not unusable, to originate a cartel which succeed accept superior global superiority in one room and whose dissects succeed not struggle incessantly aggravate economic, financial or collective progenys.


First dissect-The Truth of the Structure of Petroleum Exporting Countries:

Brief History


Encyclopedia Britannica



Second dissect- Other OPEC fashiond cartel

The rice cartel:

-The New York Times- 5 nations are thought a rice cartel:

-EBSCO- Rice emergency grips South East Asia


-„OREC” contrivance exposes ASEAN error lines


The gas cartel:

-Gas ‘cartel’ consequence puts the cats unarranged the pigeons:


Why a gas cartel could be a bust


All internet sources were downloaded on 06.05.2010.

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