Cheating Behaviour among OPEC Member-States and Oil Price Fairness and Stability: An Empirical Analysis

Masud Ibrahim, Kamil Omoteso

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Abstract

Within the context of a target oil price band regime, this paper posits that cheating behaviour in OPEC has ethical and accountability implications for the organisation. It also impacts on its reputation and ability to ensure stable and fair oil prices in the oil markets. Based on datasets covering the period from 2000 to 2012 (i.e. production quota era), analysed using the vector autoregression/vector error correction (VAR-VEC) framework, the study’s results indicate that OPEC cheating, mainly instigated by the amount of spare production capacity available to OPEC members, does not seem to have a significant direct effect on international oil prices. However, the degree of cheating by OPEC member-states might disrupt its ability to maintain surplus capacity enough to reduce price speculation in the oil markets. Should cheating behaviour in OPEC continue unabated, this could jeopardise an effective energy regulatory framework and market transparency. The paper, therefore, recommends a policy action in OPEC to support the redesigning of the existing quota system that is fair and just to its members and capable of controlling any cheating behaviour.
Original languageEnglish
Pages (from-to)98-119
Number of pages22
JournalInternational Journal of Global Energy Issues
Volume44
Issue number1
Early online date3 Feb 2022
DOIs
Publication statusPublished - 2022

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Keywords

  • OPEC cartel
  • Cheating
  • Oil prices
  • Fairness perceptions
  • Oil production
  • Oil policy

ASJC Scopus subject areas

  • Energy(all)
  • Business, Management and Accounting (miscellaneous)

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