An exercise in OPEC taxonomy

• Published date: 01 September 1983
• Date: 01 September 1983
• DOI: 10.1177/0003603X8302800303
• Subject Matter: Article

The Antitrust Bulletin/Fall 1983

An exercise in OPEC taxonomy

BY RICHARD D. EVANS·

653

The explanatory power of both the partial cartel model

of

OPEC

and the Saudi price leadership model of the world oil market are

brought into question by the paradoxical

1972

to

1975

scenario of

increasing prices teamed with increasing Saudi and total OPEC

production

levels

and market shares. However, this performance

is consistent with an alternative market scenario, the demise of a

collusive oligopsony. Using a "union versus monopsony" model,

we may predict the observed price increases, as well as increases

in Saudi and total OPEC production

levels

and market shares.

With this revised taxonomy, later production and price patterns

are viewed as reflective of a more competitive market rather than

a cartelized market.

If

OPEC is a cartel, then the economics

of

oil production and

the selfishness of individual members may be trusted to even-

tually destroy the discipline of the organization. In that case, an

energy policy designed to minimize the short-term effects of

OPEC is also an adequate long-term energy

policy.

However, if

OPEC is not a cartel, the market structure may be stable for

years, requiring an entirely different set of policies by govern-

ment and private planners.

Associate Professor

of

Economics, Memphis State University,

Memphis, Tennessee.

AUTHOR'S NOTE: Clyde Davidson provided valuable graduate assistance

in the preparation

of

this article.

Cl 1984 by Federal Legal Publications, Inc.