اوپک و تولید نفت ونزوئلا : شواهد علیه یک فرضیه کارتل

This study revisits the OPEC cartel hypothesis using a case study. A test is conducted to see if Venezuela has its production Granger cause its OPEC quota or whether the OPEC quota for Venezuela Granger causes Venezuelan production. The results show both occur at different times. In the short run, OPEC’s oil production quota for Venezuela Granger causes Venezuelan production. However, shortly after cuts, Venezuela cheats on agreements, suggesting a tit-for-tat oligopoly game, which is not anti-competitive. In the long run, we show that Venezuelan oil production Granger causes OPEC’s quota for Venezuela, but not vice versa. Having Venezuelan oil production Granger cause OPEC quotas for Venezuela in the long run suggests OPEC does not coordinate outputs as much as it reacts to them. The evidence suggests Venezuela is not a part of an OPEC anti-competitive syndicate even though we show that Venezuelan oil production is low. An alternative explanation for why Venezuela and possibly other OPEC members have low oil production outputs is that institutions and risk aversion, not cartel participation, is the cause. A vector error correction model shows that there is no tendency for Venezuelan oil production to converge to OPEC’s quota for Venezuela.

Ever since the first oil price shocks of 1973, OPEC has been accused of operating as a cartel. However, with ten or more members making up OPEC’s producers, it is normally difficult for such an organization of independent players to maintain agreements. Van Huyck et al. (1990) and other game analyses suggest agents playing cooperative games have a difficult time trusting each other especially if any uncertainty is involved, which is the case for OPEC. Furthermore, as Adelman (1986b) implies, OPEC members face the risk of losing oil value due to oil substitution technology making oil’s value decline should OPEC attempt to refrain from production now and produce more oil later. Therefore, due to the potential competition, the future risk of technological substitutes for oil, and the difficulty of coordinating in a game, there should be little if any supply reductions by OPEC members. This suggests OPEC is not a cartel. However, Kaufmann et al. (2004) and Loderer (1985) do show that oil prices have been affected by OPEC actions, although Loderer shows that the amount the price of oil increases due to OPEC decisions and the length of the time oil prices stay high are small, and Kaufman et al. show that cheating by OPEC members has nearly an exact counter neutralizing effect on quota induced price increases, suggesting a near competitive outcome not worthy of the term cartel. Nevertheless, Adelman (1986a) shows that there is less investment in Saudi Arabia and Kuwait than what would normally be the case in the United States, which suggests an effort to reduce output. What’s more, there was less investment in Saudi Arabia after 1973 than what was normal for it before 1973, although, if OPEC is affecting the market price, it is still unclear what market manipulating model—cartel, price leader or some form of oligopoly—best represents OPEC. However, changes in production by OPEC members can be caused by other factors than cartel agreements such as internal oil producer institutions. See Reynolds and Kolodziej, 2007 and Reynolds and Kolodziej, 2009. Therefore, a necessary and sufficient condition for a cartel or syndicate to be operating effectively is that it has a tool, and it is actively using that tool and that members are adhering to the tool. The only tool OPEC has to raise price is its quota system, and as Loderer shows that tool was not in use in the 1970s, and so therefore OPEC cannot have been a cartel or syndicate in the 1970s. But what about after 1981? In order to determine if OPEC worked coherently as a cartel or an anti-competitive syndicate then Granger causality (Granger, 1969) should determine if members are adhering to the quota tool or not. If the OPEC quota does not Granger cause the member’s production and if a member’s production increases before its OPEC quota is increased, then OPEC’s quotas are not working. The only way to assume that a member is adhering to some form of price manipulation in that case is to assume internal or secret agreements are occurring outside of the public view, which requires further proof. In this paper, Venezuelan oil production in comparison to OPEC’s stated quota for Venezuela is looked at. A test is conducted to see if Venezuelan production Granger causes the OPEC quota for Venezuela or vice verse. The results show both occur but at different lags. However, it is apparent based on the results that we can reject the non-causality that Venezuela production does not Granger cause the OPEC quota in the long run which is a rejection of the OPEC collusion hypothesis at least for Venezuela. However, by rejecting such collusion for Venezuela, then such collusive hypotheses have to be questioned for other OPEC members as well, although that would require a more detailed analysis of each member’s institutions, which is research for the future. Nevertheless, the evidence suggests that it is not OPEC’s quotas that are affecting Venezuelan production in the long run, but rather Venezuela’s own internal decision making that is affecting its production. For example, during the 1970s when there was no OPEC quota for Venezuela, Venezuelan oil production declined even as prices compared to the 1960s were twice as high. When world oil prices were low in the late 1980s and 1990s, Venezuelan production increased opposite what a competitive supplier normally would do. Venezuela also kept pushing its production well above stated OPEC quotas in the 1990s making Venezuela a poor cartel or syndicate participant at best. This puts into question the entire cartel or syndicate hypothesis. A more plausible reason for the Venezuelan production decline during the 1970s was because Venezuela had nationalized its oil production, which created risk aversion to investment. Venezuelan production increased during the 1990s because it put competitive institutions in place such as production sharing arrangements (PSAs), but oil production decreased again when Venezuela nullified many of its competitive contracts around 2000. A Cautious Shift Model is developed that may better explain Venezuelan and OPEC member oil production history. The paper is organized as follows. In the next section, we go over a literature review of various anti-competitive hypotheses for OPEC. In Section 3, we develop the cautious shift model that better explains OPEC behavior. In Section 2, we look at how external factors can enhance the cautious shift model, which explains the dichotomy between the 1970s and the 1980s for Venezuela and OPEC. We then explain the quadratic Hubbert model—an indexed Hubbert curve—as a method of comparing various oil production regions to the United States, a good free market example. In Section VI, Venezuela is compared to the US using the Hubbert index to show how and why Venezuelan oil production changed. In Section VII, a test of Granger causality is conducted to see if OPEC Granger causes changes to Venezuelan production or vice versa. The results show that Venezuela is causing OPEC’s long run quota to change contrary to a cartel or syndicate hypothesis. In the short run, Venezuela does sometimes follow OPEC directives indicative of a tit-for-tat game. The last section gives concluding remarks.

What is OPEC? OPEC cannot be a cartel or a bureaucratic production syndicate because it had no quotas, i.e. no tool, in the 1970s, precisely when oil prices were high. OPEC only engaged in oil quotas, i.e. instituted a tool, when oil prices were low. Game theory suggests clearly that an organizational setup such as a cartel or a syndicate cannot work when a small amount of uncertainty over whether all the players will cooperate exists. The fact that the OPEC quota follows Venezuelan production in the long run and not the other way around suggest that in fact game theory has it right. Still the question is, why do these producers not expand their production more robustly seeing as their stated proven reserves are so large? First, since game theory suggests that cartel members will cheat on production quantities, then it is likely that OPEC members will cheat on their stated reserves as well. Even Mexico and Shell Oil Company had incorrectly stated proven reserve estimates and neither of these entities are in OPEC, which begs the question why do we put so much emphasis on OPEC member reserve estimates in the first place? Second even if OPEC reserve numbers are wrong, nevertheless, most geologists suggest that OPEC members have the greatest potential for exploration and develop of additional oil and yet as Adelman points out, there is a lack of such exploration. Therefore, if OPEC members can cheat, then why do not these oil producers simply expand their production capacities unilaterally? An interesting answer is that each member’s institutions prohibit such exploration and development. For example in the United States, the eastern Gulf of Mexico stretching from 125 to 300 miles off Florida's coast, has been put under protection from oil and gas exploration by the US Congress. In 2006 as part of a deal with the state of Florida, Congress created a moratorium for Florida’s off-shore region, which is to remain off limits to energy development until 2022. Clearly that is a specific institution that reduced American oil production. We would expect specific institutions within OPEC members to have similar effects on their oil production levels. Therefore, OPEC members need to be analyzed in regards to each member’s specific institutions, separately and in detail, similarly to Florida’s off-shore institutions. In the case of Venezuela, there are clear institutional reasons for its production profile. In the 1970s as oil prices rose, Venezuela slowly moved toward nationalizing its oil assets after having had a relatively free market set of institutions before. Venezuelan nationalization, not OPEC agreements, caused its production to decline in the 1970s. Stranger still, all OPEC agreements in the mid to late 1970s were agreements to raise oil outputs and reduce oil prices contrary to what a cartel would normally do. That means it could not possibly have been OPEC that caused the oil prices to rise in the 1970s, but rather institutions within OPEC members along with resource scarcity. In the 1990s Venezuela changed its institutions back to free market ones and instituted production sharing agreements (PSAs) to induce more oil and gas activity, which reduced Venezuelan risk aversion. Then Venezuela’s production rose. OPEC though does not seem to matter in regards to Venezuela’s long run production because OPEC’s quota for Venezuela followed Venezuela’s production rather than lead its oil production. Only in short bursts of tit-for-tat games, where a bold OPEC move to reduce outputs was instituted, were there instances of Venezuela reducing its output in OPEC compliance for 2 or 3 months before Venezuela inevitably cheated. In those short instances OPEC agreements created Granger causality. Looking more closely at the institutions that run OPEC members, it is risk aversion that could be causing decreases in long run production greater than normal scarcity would suggest. This is part of the theory of the Risky Shift. Nationalization and government control created more risk aversion, reducing exploration and development of fields and subsequently reducing production. Instances of relatively freer markets, as in the case of Venezuela’s 1990s policies to use PSAs to open up its up-stream sector, created less risk aversion to exploration and development which tends to expand production for a given country. One might suggest that the US or the OECD should encourage OPEC members to open up internal institutions to more free market competition in order to have greater oil supplies now. However, seeing as after 150 years of using oil, no good technological alternative to oil has come forth, it might be the case that the OECD should applaud OPEC member efforts to conserve a precious resource for future generations with their use of restrictive institutions. OECD energy policy should emphasize what the OECD needs to do for itself, not what OPEC members need to do for themselves. Energy security, like military security, can only be assured by internal technological and policy development not external requests for countries to change their own internal policies. However, the one policy that the OECD should pursue is the defense and integrity of all oil producers' borders such that each oil producer can be free to pursue their own internal oil policy to their own countries maximum value without threat of invasions or externally instigated destruction of oil infrastructure. OPEC does not look to be a market manipulator. Rather it looks to be a set of players where each member restricts its own production due to its own intrinsic institutions, which are often risk averse creating institutions. That means world energy supplies will be constrained not only by scarcity and a worldwide Hubbert curve peak, but by individual country institutions as well. The world should therefore expect low oil supplies and high energy prices. The real energy problem is not the internal energy supply decisions of OPEC members, but the internal energy demand decisions of OECD members and the rest of the world.