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Analyze "Monopolies and Cartel" with reality report(government, international agencies, research organization, journal article, business report or new article). Pick one only. No equation or...

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Analyze "Monopolies and Cartel" with reality report(government, international agencies, research organization, journal article, business report or new article). Pick one only. No equation or theoretical graph are needed. Analyze the issue conceptually.
Answered Same Day Apr 30, 2020

Solution

Soma answered on May 03 2020
135 Votes
Title: US Shale oil growth: Time to
eak oil monopoly and OPEC Cartel
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Abstract
The Organization for Petroleum Exporting Countries (OPEC) is the most powerful cartel in modern times. Since its inception in 1960, Cartel has exercised absolute market power and control global oil price. But recent shale oil boom in United states has dramatically changed the dynamics of global oil market. Saudi Arabia, the key player in OPEC fails to maintain its control over price and gradually lose its market share. The gradual emergence of U.S has significantly changed the competitive landscape of global oil market. Cartel and monopoly does not last forever and usually killed by technological change. Oil cartel is also of no exception though it took long years to realize.
Article link: https:
scholar.smu.edu/cgi/viewcontent.cgi?article=1004&context=weil_ura
Identification of an issue:
Organization of petroleum Exporting Countries (OPEC), that was formed fifty years ago is recognized as the most powerful cartel in modern history. OPEC members controls the major share of global oil supply. According to cu
ent estimate, approximately 81% of the proven oil reserves are now located at the OPEC members countries. Needless to mention that bulk of them (65.5% approx.) are located in middles east only. OPEC members have made considerable additions of new oil reserves in recent times. They have adopted the best practice in the industry, promote explorations and enhance discoveries. OPEC has enjoyed monopoly and exercised their absolute market power in global oil market for long.
But the shale oil revolution in United states has finally changed the global oil landscape and destroyed OPEC’s monopoly. Heavy investment and technological advancement, primarily known as hydraulic fracturing has made unconventional shale oil production economically feasible. Shale oil production has vast potential and far reaching implications. This development in the supply side combined with exponential growth in emerging economies of Asia in the demand side have made a major paradigm shift in oil market. The shale oil production has far reaching consequences and vast economic implications on OPEC’s market share. The shale oil production in the large scale has come as a huge blow to OPEC monopoly power in oil market. (Lemons 2014)
The key issue of this paper will provide strong focus on the potential of US shale oil revolution and its potential impact on OPEC’s long-standing monopoly power and their market share.
Cartel: a microeconomic concept
Microeconomic theory suggest, cartel is formed when a group of producers collude and act like a monopoly to achieve a shared gal of profit maximization. Cartel can increase their profitability by exercising their monopoly power through the means of restricting supply or fixing the price. Cartel is an attempt to create monopoly or near monopoly power that would make the consumers worse off. As cartels enjoy monopoly power, they do significant harm to the consumers by charging higher price and producing less quantity. There is an inherent intention of cartel members to cheat in order to fulfil the individual objective that makes cartel unsustainable. According to Margaret Levenstein and Valerie Suslow, the...
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