OPEC has stood the test of the time and since its creations has proven to be one of the most prosperous and effective industrial monopoly alliances. The strategy that OPEC and each member country followed is always debatable. Remember that this is just a sample essay and since it might not be original, we do not recommend to submit it. These countries are referred to as the Founder Members of the Organization. OPEC is collectively formed by a group of producers of petroleum products.
Home Courses Undergraduate Courses B. In the U. I prefer suffering on my own. The main purpose of formation of the organization was to protect the interest of the members nations. Strategic planning by oligopolists always involves taking into account the likely responses of the other market participants. Please, specify your valid email address.
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The Economics of a Cartel C. The Economics of a Cartel B. It was sfudy at a meeting held on 10—14 September in Baghdad, Iraq, by five oil-producing countries: However, it can lead to reduction in revenue to its member nations when shudy have to cut-back production when they think the supply of oil and gas is in excess of the demand. In an oligopoly, firms operate under imperfect competition and a kinked demand curve which reflects inelasticity below market price and elasticity above market price, the product or service firms offer are differentiated and barriers to entry are strong.
The decisions of one firm influences, and is influenced by the decisions of other firms. In the very long run more money was diverted for research to develop more petroleum efficient and alternative technologies such as solar technology etc.
All fields Reference no. Since many similar firms are not part of OPEC, it has created an oligopoly rather than a monopoly. This has often helped to control production and hence price of oil and gas.
Study Material LESSON 14 OPEC—A CASE STUDY OF A CARTEL
Go to advanced search. The production quota is usually in proportion to the deliverability capacity of the member nations.
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The main purpose of formation of the organization was to protect the interest of the members nations. The Organization also seeks to devise ways and means of ensuring the stabilization of prices in international oil markets with a view to eliminating harmful and unnecessary fluctuations, due regard being given at all times to the interests of the producing nations and to the necessity of securing a steady income for them; an efficient, economic and regular supply of petroleum to consuming nations; and a fair return on their capital to those investing in the petroleum industry.
However, we might edit this sample to provide you with a plagiarism-free paper. OPEC has stood the test of the time and since stuxy creations has proven to be one of the most prosperous and effective industrial monopoly alliances.
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Opec Case Study
The Case Centre is dedicated to advancing the case method worldwide, sharing knowledge, wisdom and experience to inspire and transform business education across the globe. Sorry, but copying text is forbidden on this website. The first move towards the establishment of the Organization of the Petroleum Exporting Countries OPEC took place inwhen Venezuela approached Iran, Iraq, Kuwait and Saudi Arabia and suggested that stucy exchange views and explore avenues for regular and closer communications between them.
Hi there, would you like to get such a paper? On the production side, the quota system resulted in differences within the cartel and also with od non-OPEC countries. However, even a large price decrease will gain only a few customers, Factors which lead to emergence of an Oligopolists market. Those quotas are upper limits on the amount of oil each member is allowed to produce. This ot was very healthy for the sisters they were able to generate a whole lot of margin by refining their crude oil at that time development cost casr middle east was 20 cents per barrel.
In an oligopolistic ally competitive market, firms will not raise their prices because even a small price increase will lose many customers. All these resulted in fall of OPEC exports.
In this cold war era Soviet oil production kicked oligooply and around the Soviet Union displaced Venezuela as the second largest oil producer in the World, behind the United States. Ultimately OPEC had to eliminate quotas by About this item Related products Abstract This is the third of a three-case series.