One of the most traded commodities in the world today is petroleum. What happens in the petroleum market affects many people’s lives because of the commodity’s such wide range of uses after it is refined. The more well-known uses for petroleum products include as fuel for transportation and heating, however, those products are also used to make plastics and many other materials and chemical products.
For people to be able to use petroleum, it must first be drilled. Countries who then want to trade it can then enter into the petroleum market. In the market today, however, there is one group of countries, the Organization of the Petroleum Exporting Countries (OPEC), that has agreed on collaborating to control supply of petroleum.
OPEC was founded in 1960 and currently has a total of 14 member countries. The intergovernmental organization plays a large role in the supply of the petroleum market because 80% of the world’s proven petroleum reserves are located in member countries, which is a large majority (opec.org). In economic terms, OPEC is a cartel and has a monopoly of the supply. The basis for a cartel is a number of groups, in this case the member countries, that come together to work in unison. Since OPEC is able to manipulate the supply of petroleum, the petroleum market does not have perfect competition and there can become a number of inefficiencies.
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Since cartels lead to anticompetitive practices, which can reduce the level of economic growth, and as stated before, price control, the government has established laws, called antitrust laws, that protect consumers in the market from unfairness. The start of combat against such activity in the market started in 1890 with the Sherman Antitrust Act.