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Title: Cheating behaviour among OPEC member-states and oil price fairness and stability: an empirical analysis

Authors: Mas'ud Ibrahim; Kamil Omoteso

Addresses: Centre for Financial and Corporate Integrity, Coventry University, Coventry, England, UK ' College of Business Law and Social Sciences, University of Derby, Derby, England, UK

Abstract: Within the context of a target oil price band regime, this paper posits that cheating behaviour in OPEC has ethical and accountability implications for the organisation. It also impacts on its reputation and ability to ensure stable and fair oil prices in the oil markets. Based on data sets covering the period from 2000 to 2012 (i.e. production quota era), analysed using the Vector Auto-Regression/Vector Error Correction (VAR-VEC) framework, the study's results indicate that OPEC cheating, mainly instigated by the amount of spare production capacity available to OPEC members, does not seem to have a significant direct effect on international oil prices. However, the degree of cheating by OPEC member-states might disrupt its ability to maintain surplus capacity enough to reduce price speculation in the oil markets. Should cheating behaviour in OPEC continue unabated, this could jeopardise an effective energy regulatory framework and market transparency. The paper, therefore, recommends a policy action in OPEC to support the redesigning of the existing quota system that is fair and just to its members and capable of controlling any cheating behaviour.

Keywords: OPEC cartel; cooperation; cheating; fairness and oil price stability.

DOI: 10.1504/IJGEI.2022.10044863

International Journal of Global Energy Issues, 2022 Vol.44 No.1, pp.98 - 119

Accepted: 04 Dec 2020
Published online: 08 Feb 2022 *

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