The Organization of the Petroleum Exporting Countries (OPEC) is a cartel that comprises more than a dozen oil-exporting nations, primarily located in the Middle East and Africa. OPEC strives to boost oil prices worldwide by limiting output from its members. What factors might determine how the cartel divides up its joint profits amongst its members?
What will be an ideal response?
The manner in which total profits are shared by OPEC members likely depends on
their individual costs, oil reserves, and supply capabilities. Those nations with
substantial advantages in these areas can exert their bargaining power to obtain a
larger share of the joint profits. Consumer preferences may also play a role, meaning
that OPEC countries favored by large oil importers will have considerable clout in the
cartel. This favoritism is likely rooted in international politics and diplomatic relations.
Within the cartel, there may also be recognition of the power of certain members to
wield damage (or withstand damage) related to cheating, for example, via internal price
wars. Altogether, these factors probably help determine how the OPEC cartel divides up
its joint profits.
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