Why World Oil Monopolization Lowers Oil Prices: A Theory of Involuntary Cartelization

Earl Thompson

International Journal of the Economics of Business, 2000, vol. 7, issue 1, 63-78

Abstract: This paper first shows that, in the absence of long-term production commitments, time-consistent monopolistic sellers of a wasting natural resource will underconserve their resource. Since the present values of the profits of these uncommitted monopolists are generally much lower than under competition, the only rational explanation for the persistent recurrence of such monopolies in the oil industry is the high profits to current generations of oil buyers, who unite to establish such a producer monopoly. The victims of such a monopolistic cartel, besides future generations of consumers, are the producers who must involuntarily expand their current productive capacities in order to benefit the cartel leaders, who stand to benefit from the higher future prices. OPEC, rather than being a monopolistic cartel, is an excess-capacity cartel, one that has been induced by current generations of buyers to supply sufficient excess capacity to efficiently accommodate their prospective future emergencies.

Keywords: Time-CONSISTENCY; Monopoly; International Cartels; Natural Resources; Conservation; Intergenerational Exploitation (search for similar items in EconPapers)
Date: 2000
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.tandfonline.com/10.1080/13571510084069 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:ijecbs:v:7:y:2000:i:1:p:63-78

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/CIJB20

DOI: 10.1080/13571510084069

Access Statistics for this article

International Journal of the Economics of Business is currently edited by Eleanor Morgan

More articles in International Journal of the Economics of Business from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().