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Price and output agreements of cartel

Over the last 30 years the Organization of Petroleum Exporting Countries (OPEC) has had varied success in forming and maintaining its cartel agreements. Explain how the following factors may contribute to the difficulty of forming and/or maintaining its price and output agreements.
a. New oil fields are discovered and increased drilling is undertaken in the Gulf of Mexico and the North Sea by nonmembers of OPEC.
b. Crude oil is a product that is differentiated by sulfur content: it costs less to refine low-sulfur crude oil into gasoline. Different OPEC countries possess oil reserves of different sulfur content.
c. Cars powered by hydrogen are developed.

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Explain how the following factors may contribute to the difficulty of forming and/or maintaining its price and output agreements.
a. New oil fields are discovered and increased drilling is undertaken in the Gulf of Mexico and the North Sea by nonmembers of OPEC.

This will increase the difficulty in maintaining the price and output agreements. This ...

Solution Summary

This explains the price and output agreements of cartel

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