The Effect of OPEC Production Allocations on Oil Prices
32 Pages Posted: 18 Aug 2008
Date Written: August 16, 2008
Abstract
Production allocations are analysed in conjunction with an investigation of unlagged and optimally lagged relationships between key daily crude oil price series interacting with OPEC prices. It is found that structural breaks in the interacting series coincide with production allocations meetings which induce oil price increases. This implies cartel behaviour through collusive supply restriction. With crude oil prices at record highs, high inflation in developing countries and the onset of increased systemic risk in global financial markets, the major global players should well remember the impact of OPEC oil supply interference and cartel behaviour of the late 1980s early 1990s on global financial stability.
Keywords: production allocations, crude oil price series, OPEC, Non-OPEC, US, structural breaks, cointegration, causality, cartel behaviour
JEL Classification: Q41
Suggested Citation: Suggested Citation
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