Macroeconomics Case Study

OPEC in 2004

OR

Abstract:
The case talks about the Organisation of the Petroleum Exporting Countries (OPEC). OPEC had 11 member nations in 2004 and was one of the most important forces in the world oil market. It controlled 70% of the world’s oil reserves and 35% of gas reserves. OPEC as an oil cartel was most successful in the 1970s. However, since then, there were several events which reduced OPEC’s market share from 63 % in the 1970s to about 38 % in 2004. OPEC faced competition not only from producers such as Russia and Norway, to whom they had lost a majority of their market share but also from the growth of non-oil energy sources. As OPEC’s member nations were primarily dependant on oil for their income, OPEC’s power to control oil prices was of great concern to them. The case talks about the various factors that determined OPEC’s future as a cartel.

Pedagogical Objectives:

• Structure and economics of the world oil industry
• How do cartels work and what are the inherent factors that make or break them?
• What is the role of international geopolitics on oil production, supply and pricing?
• How did OPEC’s production and pricing policies affect its market share?
• What should OPEC’s strategy be to regain a part or more of its lost market share?

Keywords : Macroeconomics Case Study, OPEC, Oil Ind, Crude Oil, Pricing oil, Production Quotes, Oil crisis, Oil Exploration, Oil & Geopolitics, Saudi & Oil, US & Oil, Russia & Oil, China & Oil, Oil energy sources