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The opening statement on the Website of the Organization of Petroleum Exporting Countries (OPEC) says its members seek . . . to secure an efficient, economic, and regular supply of petroleum to consumers, a steady income to producers and a fair return of capital for those investing in the petroleum industry. To achieve this goal, OPEC attempts to coordinate and unify petroleum policies by raising or lowering their collective oil production. However, increased production by Russia, Oman, Mexico, Norway, and other non-OPEC countries has caused the price of crude oil to fall dramatically in recent years. To achieve its goal of stable and fair oil prices, what must OPEC do to maintain the price of oil at its desired level? Do you think this will be easy for OPEC to do? Explain.
Ans: In order to maintain the oil prices at a considerable level, OPEC has to frame certain policies regarding the prices and the output of oil production. There has to be regulations made that decide the amounts of oil production by various oil producing countries and the amounts that can be imported or exported for any country. In situations in the global economy where there are consistent fall in oil prices that harms the producers, OPEC has to take the decision of limiting the oil production and supply to the countries so as to revive the falling oil prices. In other situations, when the oil price rise very high, OPEC has…

to regulate the conditions in the prevailing prices such that the consumers are not hit severely. This task is not easy on the part of OPEC because any decision taken in the favour of producers to keep the prices high will harm the consumers and any decision that benefits the consumers will not be in the interest of the producers. Thus, policies have to be such that they are equitable for both buyers and sellers of oil.



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