1. Group no. 4
Subject : economics
Guided by : miss Rupal Bhatt
Hardik
Vishal
Anita
Ravi

2. Opec and the world oil market
• Summary
• Macro problem
• Micro problem
• Alternatives
• conclusion

3. summary
• Our story about the town’s market for water is
fictional, but if we change water to crude oil, and
jack and Jill to Iran and Iraq the story is close to
being true.
• The world’s oil is produced by few countries
mostly in the middle east.
• These countries together make up an oligopoly.
• Their decision about how much oil to pump are
much the same as jack’s and jill’s decision about
how much water to pump

4. • As originally formed in 1960,opec included
iran,kuwait,saudi arabia etc.
• By 1973, eight other nation had joined.
• These countries control about three-fourths of
the world’s oil reserves

5. Macro problem
• Opec try to raise the price of its product
through a coordinated reduction in quantity
produced.
• Opec tries to set production levels for each of
the member countries

6. Micro problem
• The problem that opec face is much the same
as the problem that jack and Jill face in our
story.
• Opec countries would like to maintain a high
price of oil.
• Each member of the cartels is tempted to
increase its production to get high profit
• Opec member frequently agree to reduce
production but then cheat on their agreement

7. Alternatives
• Opec was not maintaining cooperation and
high price.
• The price of crude oil rose from $3 a barrel in
1972 to $11 in 1974 and then to $35 in1981.
• 1980s member countries began arguing
about production level and opec became at
maintaining cooperation.
• 1986 the price of crude oil had fallen back to
$13 a barrel .

8. Conclusion
• The member of opec have continued to meet
regularly, but cartel has been less successful.
• The price of oil rose significantly in 2005.
• Oil demand increase in world market.
• The price of crude oil adjusted for overall
inflation
• While this lack of cooperation its benefited
consumer around the world.