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An Analysis of OPEC Stability: Sacrifice Ratio Approach and Effect of Iran Economic Sanctions

Shahram Moeeni (), Alimorad Sharifi () and Hadi Forouharmanesh ()
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Shahram Moeeni: Assistant Professor of Economics, University of Isfahan
Alimorad Sharifi: Associate professor of Economics, University of Isfahan
Hadi Forouharmanesh: MA in Energy Economics, Shahid Ashrafi Esfahani University

Quarterly Journal of Applied Theories of Economics, 2016, vol. 3, issue 3, pages 1-24

Abstract: The main purpose of this study is to analyze the stability of OPEC, based on approach of Danielsen's sacrifice ratio and the impact of Iran economic sanctions. For this purpose two concepts called the reserves sacrifice ratio and the capacity sacrifice ratio on Danielsen model framework have been used for investigating the stability of OPEC. Relationship between sacrifice ratios and variables such as population, gross domestic product (GDP), production and oil production capacities of all members of OPEC have been reviewed and analyzed. Iran sanctions as an important factor influencing on amount of sacrifice ratios and totally OPEC stability have been studied. Period of study has been chosen from 2000 to 2014. The results of this study show that during the examined period, there is a meaningful and negative correlation between population and sacrifice ratios. There is a meaningful and positive correlation between oil reserves and sacrifice ratio too. OPEC countries with large oil reserves have a tendency to restrict extraction of crude oil reserves. There is a meaningful and positive correlation between Iran economic sanctions and sacrifice ratio. Iran's oil production capacity has been reduced due to sanctions against Iran and consequently sacrifice ratios of reserves and oil capacities have been increased. According to results of this research there is no evidence to suggest OPEC collapse. As a result of this study, OPEC still considered a stable organization.

Keywords: Stability; Sacrifice ratio; Collusion; Economic sanction; OPEC. (search for similar items in EconPapers)
JEL-codes: F53 Q35 Q40 (search for similar items in EconPapers)
Date: 2016
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