… or a clumsy cartel causing excessive volatility in world oil prices, or maybe none of the above. Earlier this week the Cato Institute hosted a discussion of a recent report by Andrew Morriss and Roger Meiners, “Competition in World Oil Markets: A Meta-Analysis and Review.” Panelists included Morriss, FedEx chairman Frederick Smith, and SMU economist James L. Smith. Jerry Taylor coordinated the program.
Of the group of panelists, I think it is J. Smith that has the best handle on the evidence — which unfortunately is all over the map. Yes you can find evidence that OPEC has manipulated oil prices and contributes to instability, but your can find comparable evidence suggesting OPEC has had no real effect. My preferred view is that Saudi Arabia has had an ability to swing prices up or down a bit at the margin–they being the one country willing to maintain excess productive capacity and manage it with an eye to long-run price levels. On J. Smith’s discussion of the evidence, perhaps I should become more agnostic on the matter.
If you, too, have an opinion about the effect of OPEC on world oil markets, then you ought to listen to the program and consider whether your view is well supported by detailed studies of the issue.
ADDED: Mentioned in the discussion is James Smith’s Journal of Economic Perspectives article, “World Oil: Market or Mayhem?“, available free online.