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Heterogeneous noncompliance with OPEC's oil production cuts

Dror Parnes

Energy Economics, 2019, vol. 78, issue C, 289-300

Abstract: In this study we explore the heterogeneous noncompliance behavior among ten member nations of the Organization of the Petroleum Countries (OPEC). Overall we find that the three top-oil-producers (Saudi Arabia, Iran, and Venezuela) and the four relatively low-oil-producers (Libya, Indonesia, Algeria, and Qatar) exhibit higher cheating frequencies and magnitudes, while they tend to offset their peers' conduct. Conversely, the three mid-oil-producers (UAE, Nigeria, and Kuwait) display much lower frequencies and magnitudes of noncompliance with OPEC's administered quotas, while they largely demonstrate herding behavior among their peers. The volatilities of the respective cheating magnitudes are rather similar across the three clusters though. This study contributes to the economic literature by further illuminating the operational mode of OPEC, and by exposing its three main subsets, its interdependent structure, and its members' customary behavioral patterns.

Keywords: OPEC; Oil production cuts; Heterogeneous noncompliance; Interdependency (search for similar items in EconPapers)
JEL-codes: E23 F53 P28 Q43 (search for similar items in EconPapers)
Date: 2019
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Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

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