Cartels and Collusion - How OPEC Controls Oil

Why this matters

OPEC's members meet in Vienna and agree on how much oil to produce and what price that should bring, coordination that would send U.S. oil executives to federal prison under the Sherman Antitrust Act. The arrangement has lasted 65 years because Saudi Arabia keeps absorbing the overproduction everyone else is tempted to cheat with.

Students picture a cartel as one company setting prices at will, so the three real breaks in OPEC's discipline, the 1985 Saudi flood, the 2014 shale war, and the 2020 COVID cut, correct that fast. A cartel is really a coalition tempted to cheat on itself, which is why the closing memo reads like real policy work.

From one teacher to another

This one puts students on Meera Agarwal's cartel and market structures team at the U.S. Energy Information Administration, working the same question EIA analysts actually work: if everyone in a cartel agrees to keep prices high, why does someone always cheat? They build the cartel definition off OPEC itself, then chase the cheating incentive straight to Saudi Arabia, since the whole 65-year arrangement only survives because one country is willing to be the swing producer absorbing everyone else's overproduction. I built the timeline around three real moments OPEC's discipline broke down entirely, the 1985 Saudi flood, the 2014 shale price war, and the 2020 COVID cut, because a cartel that's always fought amongst its members is a much more accurate picture than a cartel that just sets prices at will. They finish by reading three real charts and writing a briefing memo recommending what U.S. policy should actually do about it.