Location of Repository

Political Constraints on Government Cartelization: The Case of Oil Production Regulation in Texas and Saudi Arabia by

By Gary D. Libecap and James L. Smith


We examine government cartelization efforts in crude oil production. Texas and Saudi Arabia are alleged to act as swing producers to maintain the interstate (1933-1972) and OPEC (1973 on) oil cartels respectively. We analyze the political constraints that affected the ability of Texas and Saudi Arabia to act as residual producers within their respective cartels. In the case of Texas, political factors molded individual firm production quotas, advantaging high-cost producers and hence, reducing total cartel net profits. Further, Texas had limited range for adjusting total state production to maintain interstate output at levels consistent with target prices. Saudi Arabia’s role as swing producer within OPEC raises similar questions regarding how cartel output is shared among members, and the extent to which domestic economic and political pressures coming from various member countries may undermine the effectiveness of the cartel. OPEC ‘s coordination problem has been more difficult than that faced by the interstate cartel for a variety of reasons that we explore. Even so, they have not kept the OPEC members in general, and Saudi Arabia in particular, from exerting a strong influence on the level of world oil prices

Year: 2001
OAI identifier: oai:CiteSeerX.psu:
Provided by: CiteSeerX
Download PDF:
Sorry, we are unable to provide the full text but you may find it at the following location(s):
  • http://citeseerx.ist.psu.edu/v... (external link)
  • http://www.icer.it/docs/wp2001... (external link)
  • Suggested articles

    To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.