Work detail

Optimization of oil production by OPEC countries

Author: Bc. Markéta Pilátová
Year: 2018 - summer
Leaders: RNDr. Michal Červinka Ph.D.
Consultants:
Work type: Bachelors
Language: English
Pages: 53
Awards and prizes:
Link: https://is.cuni.cz/webapps/zzp/detail/191809/
Abstract: Almost 4 years of low oil prices and excess supply call the relevance of OPEC
for current oil market into question. Therefore to investigate its role, this
thesis examines the optimum oil production of individual OPEC countries
accenting the consequent profit. Firstly, Cournot’s model is employed to find
equilibrium price and output on the oligopolistic market. Secondly, model
considering OPEC and Russia as the Stackelberg leader with competitors
forming oligopolistic fringe helps to uncover the potential of the recent cartel
of OPEC and Russia. In both models, data from the year 2016 with
different levels of elasticity ranging from -0.1 to -0.2 are utilized. Our research
suggests that all OPEC members could have increased their profits
by forming a non-cooperative oligopolistic market, where prices would reach
up to 81.7 USD/bbl. Moreover, as a part of the cartel with Russia, OPEC
could increase its joint profits by almost 27 % compared to the oligopolistic
market, benefiting from coordinated output cuts followed by a steep growth
in price. Thus we can conclude that either OPEC lost its power over the
oil market or attempted to maintain its market share and drive higher-cost
producers out of the market.

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