OPEC

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The Organization of Petroleum Exporting Countries, otherwise known as OPEC is a permanent, intergovernmental organization, created at the Baghdad conference on September 10–14, 1960, by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. The five founding members were later joined by eight other members. These countries included Qatar in 1961, Indonesia in 1962, Socialist Peoples Libyan Arab Jamahiriya in 1962, United Arab Emirates in 1967, Algeria in 1969, Nigeria in 1971, Ecuador in 1973 up till 1992 and Gabon in 1975 up till 1994. OPEC had its headquarters in Geneva, Switzerland, in the first five years of its existence. OPEC then moved to Vienna, Austria, on September 1, 1965. OPEC accounts for 40% of global production and 75% of known reserves.
OPEC is an example of an Oligopoly with regards to its market structure. This means there are few sellers in the market, the product is either homogeneous, or differentiated and there is difficult market entry. With regards to OPEC, this means that there are not many countries who sell oil, all the oil is identical meaning that it is a homogeneous product. For example, the oil sold by Saudi Arabia is identical to the oil from Iran. Finally, formidable barriers to entry protect firms from new entrants. These barriers include exclusive financial requirements, control over an essential resource, patent rights, and other legal barriers. Although the most significant barrier to entry in an oligopoly is economies of scale. Oligopolies are very similar to monopolies because they are present in real-world industries. The one main thing that sets the two apart are the fact that in a monopoly you have just one firm operating.
An oligopoly formally organizes into a cartel and then acts like a shared monopoly. This is why the two structures are similar. OPEC is a cartel and cartels are illegal in this U.S. OPEC restricts output of its members to maintain a high price of oil. Collect...