OPEC Oligopoly and Collusion

Described as the most powerful cartel on Earth, OPEC was started in 1960 by Iraq,
Kuwait, Iran, Venezuela, and Saudi Arabia all major oil-producing companies. Today, it has
grown to include a few more in Africa and the South America. When examining its short-term
effectiveness, it is important to include a discussion of the 1973 oil embargo on the United
States. OPEC grew to have the power it has today because of that embargo; the U.S. economy
was crippled without a source of energy, and as such, American diplomacy today is cognizant of
the power of the cartel to do it once more.
As of 2012, OPEC has wielded profits upward of $1 trillion. However, according to
Brown University political scientist Jeff Colgan, since OPECs birth, member countries have
cheated on their quotas 96% of the time. Though individual countries have flourished because of
rising oil prices, it cannot be clearly attributed to OPEC it would be more accurate to say that
because of rising oil demand in BRIC countries, their profits have increased.
The end goal of oligopolies and really, any economic system is to maximize profits.
OPEC began with the idea that if quotas were set on oil production and demand continued to
grow as countries around the world industrialized, the value of their oil would explode. However,
factors like the oil glut of the 1980s and profitability of cheating on quotas to meet growing
countries demand have proven that OPEC really is not as valuable and influential as it seems.
In terms of general oligopolies, it makes sense that oligopolists would collude to reduce
supply or keep prices similar it seems to be the most profitable course of action. Sometimes
they may even form widely known cartels like OPEC to attempt to maximize profits. However,
like in the case of OPEC, it is important to remember that there are often many other factors
playing into the demand for products that oligopolists want to break the agreements that they
have made after all, if they can make more money that way, why wouldnt they?