A Study of the Crude Oil Market and OPEC Behavior: 1973-2007

This paper investigates the existence of a dominant producer in the world oil market. As some previous studies have indicated, OPEC can be characterized as a cartel and a dominant producer of crude oil. This study reinvestigates this possibility using a larger time frame. A multi-equation econometric model is created using past research and applied to the period between 1973 and 2007. The results reject the possibility that OPEC is a dominant firm that has the ability to set oil market prices. Both the fringe firms and OPEC also fail to show competitive behavior indicating that the oil market is following an unknown market behavior. In conclusion, OPEC seems more likely to be a collection of individual countries with differing agendas and production decisions than it is a single identity such as a cartel