The world's most visible cartel, the Organisation for Petroleum Exporting Countries (OPEC) announced last year that it was cutting output. This report suggests that:
The group agreed to a record 4.2 million barrel a day cut in production in late 2008 as global demand fell 0.6 percent, the first decline since 1983. Members are now adhering to about 54 percent of that cut, the IEA’s monthly report showed. Compliance reached a peak of 79 percent in March 2009, based on Bloomberg data.
Since then the price of oil has fallen slightly and OPEC members are concerned about the value of the US dollar, in which their oil is priced.
The declining price of oil is probably as a result of two factors. Firstly, as the output cut was expected it is likely that markets had it priced in long before the meeting. Secondly, the price is all markets is as a result of the interaction of supply and demand. OPEC may be able to control supply but demand is not so malleable.
Of course, as James Surowiekci tells us here the problem with cartels is that individual members have the incentive to cheat. With the current fall in the price of oil, countries may actually want to increase output in order to maintain their oil revenues.
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On a related note we can consider the impact of lower oil prices. This can be considered in the same vein as Landsburg's discussion of the impact of recycling on the number of trees and the impact of a pesticide bans and cancer rates. Time Magazine asks Is Cheaper Oil A Good Thing?
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