The political economy of OPEC

Zilberman, David

doi:10.1016/j.eneco.2015.01.002

Cited by 16 publications

(6 citation statements)

References 36 publications

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“…While some argue strictly that OPEC does not show cartelisation behaviour and should not be regarded as a such (Colgan, 2014;Kisswani, 2016;Plaut, 1981;Reynolds and Pippenger, 2010), others acknowledge OPEC's nature as a cartel but with limited collusion and prices below perfect cartelisation (Almoguera et al, 2011;Huppmann and Holz, 2012;Okullo and Reynès, 2016). Domestic oil dependency and the role of oil for the international economy further complicate this debate by adding other possible objectives regarding geopolitics, welfare, and domestic stability to profit maximisation (Hochman and Zilberman, 2015;Kisswani, 2014;Schwarz, 2008). The same applies to non-monotonicities such as behaviour and effectiveness differing with the direction of price changes (Alkhathlan et al, 2014;Loutia et al, 2016) Obviously, the complicated, unclear nature of OPEC is a central challenge for modellers, who have to determine strategic objectives and the role of competition in the market.…”

Section: Understanding and Modelling Opecmentioning

confidence: 99%

OPEC, Saudi Arabia, and the shale revolution: Insights from equilibrium modelling and oil politics

Ansari

2017

Energy Policy

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Why did OPEC not cut oil production in the wake of 2014's price fall? This study aims at aiding the mostly qualitative discussion with quantitative evidence from computing quarterly partial market equilibria Q4 2011 -Q4 2015 under present short-term profit maximisation and different competition setups. Although the model performs reasonably well in explaining pre-2014 prices, all setups fail to capture low prices, which fall even beyond perfect competition outcomes. This result is robust with respect to large variations in cost parameters. Rejecting present short-term profit maximisation, as well as a qualitative discussion of Saudi Arabian politics and the shale oil revolution, lead to the conclusion that the price drop of 2014-16 was most plausibly the result of an attempt to defend market shares and to test for shale oil resilience, besides being fuelled by other factors such as rising competitiveness of alternative technologies. Although shale oil might have increased competition permanently (as supported by model results), the agreement of December 2016 should not be misunderstood as an OPEC defeat.

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Section: Understanding and Modelling Opecmentioning

confidence: 99%

OPEC, Saudi Arabia, and the shale revolution: Insights from equilibrium modelling and oil politics

Ansari

2017

Energy Policy

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“…These findings are fair with the dominant-competitive fringe theory. Hochman and Zilberman (2011) explain that OPEC is seen as the dominant price-setter with high proven crude oil reserves compared to Non-OPEC firms, and able to impose production quotas to its member countries and also non-member countries. OPEC are able to target revenue-based through spare capacity utilization compared to Non-OPEC, who required to produce at full capacity in order to bring production costs lower (Kaufman et al, 2008;R.Golombek et al2018).…”

Section: Resultsmentioning

confidence: 99%

The Moderating Effect of OPEC and Non-OPEC on the Relationship Between Oil Price Volatility and Accrual Earnings Management in the Oil and Gas Industry

Sandrasigaran

Johari

et al. 2020

JAFEE

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This study is an empirical examination on the relationship between oil price volatility and earnings management in the oil and gas industry, moderated by price-setting abilities of OPEC (Organization of Petroleum Exporting Nations) and price taking abilities of Non-OPEC countries. This study tests discretionary, income-decreasing, current and non-current accruals as a proxy of earnings management. A total sample of 209 firm-year observations from 2008 to 2018 of listed oil and gas firm is collected from the Thomson Datastream database. To incorporate the moderation effect, the samples were divided into two sub-groups, OPEC and Non-OPEC using reserve to production ratio. Firm attributes are included in the analysis as the constant variable such as leverage, current ratio, EBITDA and Growth. The initial results show that, overall, the interaction effect between OPEC/Non-OPEC and oil price volatility is positive and significant to discretionary and income-decreasing accruals. Data samples are limited while comparing OPEC and Non-OPEC countries as not every oil and gas company in OPEC are listed companies and their information is heavily protected. This study contributes to extant earnings management literature regarding political cost, which remains a significant concern to oil and gas companies worldwide.

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“…There is some evidence that citizens from resource-rich countries believe that resource wealth should be distributed among the population, including by lowering the prices of the resource ( Chelminski, 2018 ). In some OPEC countries, there remains a belief that certain sections of society deserve some form of subsidized energy ( Hochman and Zilberman, 2015 ), and the same argument has been made in the Nigerian context ( Nwachukwu et al, 2013 ). Furthermore, support for pricing reform is clearly influenced by the extent to which those in the same community support reform ( Blankenship, Wong, and Urpelainen, 2019 ).…”

Section: Literature and Hypothesesmentioning

confidence: 93%

Fuel subsidy reform and the social contract in Nigeria: A micro-economic analysis

McCulloch¹,

Moerenhout²,

Yang³

2021

Energy Policy

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Fuel subsidies in Nigeria are enormous – around USD 3.9 billion – almost double the health budget. Such subsidies come at great cost: the opportunity costs of such spending on other development objectives are large; the distribution of resources to the state governments is reduced; the vast majority of the subsidy goes to better off Nigerians; and cheaper petrol encourages greater pollution, congestion and climate change. Despite this, most Nigerians oppose the reduction of subsidies. We draw on a new nationally representative household survey that asked Nigerian men and women about their knowledge and attitudes towards subsidies. We construct and test a set of hypotheses about the factors associated with support for subsidy reform. We find that those who pay more or who experience less availability of fuel tend to support reform more. On the other hand, people who believe the Government is corrupt or lacks the capacity to implement compensation programs appear strongly opposed to reform. Finally, being religious and the delivery of reasonable national and local services also improves the acceptance of reform. These results support the idea that building a social contract is key to reform success.

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The political economy of OPEC

Cited by 16 publications

References 36 publications

OPEC, Saudi Arabia, and the shale revolution: Insights from equilibrium modelling and oil politics

OPEC, Saudi Arabia, and the shale revolution: Insights from equilibrium modelling and oil politics

The Moderating Effect of OPEC and Non-OPEC on the Relationship Between Oil Price Volatility and Accrual Earnings Management in the Oil and Gas Industry

Fuel subsidy reform and the social contract in Nigeria: A micro-economic analysis

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