The question is: "Many oil analysts are predicting a rapid decline in world oil output in 10-20 years as world reserves are depleted. What effect is this likely to have on OPEC's behaviour?"
I checked some sources but do you have any idea about the best source for OPEC policies and views.
2007-09-11 23:25:11 · 3 answers · asked by Anonymous in Social Science ➔ Economics
Well OPEC does not really publish their goals and views.
They are an oil cartel, which means that they try to control the price of crude oil for the benefit of their members.
How will they respond to a decline in output? There will be nothing they can do. Right now, they limit output to keep oil prices high, and occasionally increase production when prices are high to make more money.
If the oil in the ground is running out, they will stop limiting output. Because some member countries will have more oil left than others some will benefit from the lower worldwide production.
At that point the cartel will fall apart as the only reason it exists is because it is in the interest of each country to participate. When it is no longer beneficial to limit output, countries with oil left will produce as much as they can until the oil runs out or the world market switches to an alternative fuel and demand collapses.
2007-09-12 02:20:13 · answer #1 · answered by Yo, Teach! 4 · 0⤊ 0⤋
The best sources are:
the Energy Information Administration http://www.eia.doe.gov/
and the Saudi Aramco website at http://www.saudiaramco.com/irj/portal/anonymous
and the International Energy Agency at http://www.iea.org/
as well as the OPEC website - http://www.opec.org/home/
If there is a rapid decline, which there may be, then OPEC will be attempting to further develop their current reserves, as well as maintain current production. If fuel prices find the point where they are elastic, alternatives will be sought out by market participants. Folks thought $80 a barrel would see elastic demand. We are almost there, and demand has not changed. So we are still seeing inelasticity.
Declining production isn't due to declining reserves, in my view, but goes to declining developed reserves. There is plenty of oil out there, but its not developed.
2007-09-12 10:45:43 · answer #2 · answered by super Bobo 6 · 0⤊ 0⤋
The economic theory of exhaustible resource "hotelling rule" predicts that the profit is maximum if production is put on a declining path long be for the supply is gone. See
http://en.wikipedia.org/wiki/Hotelling's_rule
This may be why they are not investing in new production facilities now, even though prices are high.
2007-09-12 16:22:39 · answer #3 · answered by meg 7 · 0⤊ 0⤋