What is OPEC? Why does it possess power over global oil prices?
While OPEC’s market power has diminished since the 1970s — the cartel’s percentage of the global production of crude oil having fallen with the addition of new, non-OPEC sources of crude oil production such as the North Sea and Alaska — it is still the dominant player when it comes to world market for crude oil. As long as the cartel is able to coordinate its interest OPEC will exert significant influence. However, cartels are notoriously unstable and OPEC has shown in the past that it is not able to maintain a coordinated production policy for more than a few years at a time. You can check out the OPEC website at http://www.opec.org/. Here’s an interesting tidbit — the inflation-adjusted price (using 2001 dollars) for gasoline in California in 1973 was $1.31 (nominal price $0.39) in 1999 it was $1.42 (nominal price $1.36) (Source: California Energy Commission). So when you take inflation into consideration, really the price at the pump isn’t taking much more of a bite out of our po
