An Analysis of Intra-OPEC Bargaining Game with emphasis on New Outlook and Sanctions (2011-2019) Using Google Trends

Authors

1 Assistant Professor, Department of Economics, University of Isfahan, Isfahan

2 Associate professor, Department of Economics, University of Isfahan, Isfahan, Iran

10.22108/ies.2020.116136.1061

Abstract

Crude oil is the most traded commodity in the world and its market has great influences on the global economy and macroeconomic activities. The present study seeks to analyze Iran's policy for oil production and export within the framework of intra-OPEC bargaining game.  This analysis helps to review Iran oil policy and to propose an appropriate strategy in the new circumstances. The analysis of strategic relations shows that OPEC's members can be divided into two groups of saver and spender countries. This categorization is due to economic, demographic and petroleum differences of OPEC's countries. OPEC members are different in terms of discount rates, impatience, and urgent need for oil revenues too. We try to model the relationship between oil quotas/production and demographic, economic and oil variables based on Intra-OPEC bargaining game. The model estimated for the period 2001-2019. The results indicated a strong and significant relationship between the ratio of oil production to reserves and demographic, economic and oil variables. Bargaining between the two groups can largely determine the behaviors of OPEC and members. The model estimation suggested that oil market faces a tendency towards faster production and export in response to the shift in world oil market outlook. The results suggest that Iran's oil production capacity, the market share of Iran and recovery rates should be upgraded. Finally, the current role of Iran in OPEC does not fit into its economic needs and should be reviewed based on the above results. The study indicated that the inherent heterogeneity in OPEC still help Iran plan to achieve its historic quota and position in OPEC.
JEL Classification: C07, D74, L13, L16.

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