OPEC and the hyperpluralism of the oil market in the 1980s

Abstract

From the point of view of the oil states, the emergence of the Organization of Petroleum Exporting Countries (OPEC) as a price administrator in the 1970s was one of OPEC's most remarkable achievements to date. OPEC set prices in the 1970s largely because it was operating in a highly integrated oil market. In the 1980s, however, the hyperpluralism of the world (that is, the non-communist) oil market and the demise of OPEC as a price administrator appeared to have more or less coincided. This article will examine the reasons underlying the loss of primacy of OPEC as a price administrator and treat its cartelization between 1982 and 1984 as an aggregated attempt to recapture that role. The main thesis here is that OPEC, as an association of shared power, was never meant to be a cartel. Cartelization, though an economic arrangement, was essentially adopted by OPEC during the period 1982-4 as a compromise, an ad hoc measure of the last resort. This compromise is likely to last under acutely depressed market conditions, but the appearance of a buoyant oil market is likely to undo it.