Does OPEC matter?

When OPEC announced it would not cut oil production in response to falling prices, oil markets shuddered. The reaction appeared to confirm the dominance of OPEC and has been interpreted as a sign of the cartel’s strength. So how much influence does OPEC really have on prices? In my view, none. OPEC isn’t a monopoly that can simply set the oil price. It's a coalition of 12 oil producers who, together, control about 40% of global production. For OPEC to exert influence, all members must limit their own output. That is possible in theory but, in practice, unlikely. Let’s assume...

When OPEC announced it would not cut oil production in response to falling prices, oil markets shuddered. The reaction appeared to confirm the dominance of OPEC and has been interpreted as a sign of the cartel’s strength.

So how much influence does OPEC really have on prices? In my view, none.

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