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Essay / Research Paper Abstract
This 6 page paper consider the background of OPEC, why they have so much power over the oil industry and their general pricing strategies between 1973 – 2002. The bibliography cites 3 sources.
Page Count:
6 pages (~225 words per page)
File: TS14_TEopecrc.rtf
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Unformatted sample text from the term paper:
this reason that one of the few legal cartels exist and is accepted to ensure the oil flows and needs are met. If we look to the topic of
oil and the role of economics in its use and development we need to understand the role that OPEC has, and continues to play.
The role of economics in the oil industry can be seen as the same as any other market; one of supply and demand. The rules of supply
and demand are such that where the demand of a product outstrips supply there will be in increase in price until the demand has dropped enough for equilibrium in the
market to be reached. If the supply exceeds the demand then the price will fall until a level is reached where the demand has increased sufficiently for the market to
again be in equilibrium. In reality most markets are in a state of flux, however, with oil products the market is a needed for the product, and even where prices
increase the overall income that is received by the producers will increase as the decrease will not be in proportionate to the price increase.
This means that it is an inelastic product, as petroleum is an inelastic product, when prices increase and the demand decreases as a result the oil producers will
still see an overall increase in profits. For this reason it is understandable why the producers would wish to maintain higher prices by limiting the supply.
The role of creating OPEC can be seen as the cure as well as indicating the way that the oil market worked before its introduction such
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