OPEC behavior: The volume of oil reserves announced

Abstract

OPEC procedures dictate that all member states should notify the volume of their crude oil reserves to the organization secretariat so that OPEC would reflect the figures in its official published materials. Many OPEC states say that it is not feasible to investigate the amount of their oil reserves through independent observers, believing this is a confidential issue. In fact, a contradiction appears to exist between the data for each oil field and the figures publicly announced for the fields on aggregate. This comes under the pretext of existing doubts about the volume of declared reserves.Contrary to oil companies whose inventory volumes are examined and audited by internationally accredited companies, no mechanism exists for verifying OPEC members' reserves. A wide range of studies have been conducted to investigate the behavior of OPEC and its effects on global oil markets; however, the present article seeks to demonstrate the effect of increased volume of OPEC oil reserves on their production and supply behavior and give remarks on the validity of such declarations. In this paper, Markov Switching Model is used to study the effect of the announcement of the increased OPEC oil reserves on the level of production of 11 OPEC member states. According to the study, only Kuwait has had a significant positive coefficient for the growth of its reserves.