Friday 27 May 2016

The end of OPEC

I read an article called "The Death of Opec", by Ed Crooks. He points out that there are many signs showing that the cartel is failing to unite together and form some sort of production freezing agreement. As I argue in one of my previous articles that once one member of a cartel cheats on other members, the cartel is about to collapse, the action taken by Saudi Arabia of increasing its supply contributes to the collapse of the OPEC. However, we will not see a big dramatic fall in the oil price, as although the cartel may collapse (the member countries cannot unite together and play a monopoly strategy), the oil market is still an oligopolistic market that the oil price will still be higher than a perfectly competitive market. Therefore, I think that the oil price will stay relatively stable unless there is some major innovation in the energy field.

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