Policy Forum

The Impact of Cartel Behavior on Global Oil Prices and the Challenge to Free Markets

April 25, 2013 12:00 PM to 1:30 PM EDT

Hayek Auditorium

Featuring Frederick W. Smith, Chairman, President and Chief Executive Officer, FedEx Corporation; Andrew Morriss, D. Paul Jones Jr. & Charlene A. Jones Chairholder in Law and Professor of Business, University of Alabama; and James L. Smith, Cary M. Maguire Chair in Oil and Gas Management, Southern Methodist University; moderated by Jerry Taylor, Senior Fellow, Cato Institute.

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The OPEC cartel has been the key actor in world crude oil markets for four decades and counting. Even so, there is a surprising amount of disagreement about the nature of OPEC’s influence on oil markets.

In a new study published by Securing America’s Future Energy (SAFE), authors Andrew Morriss and Roger Meiners survey the academic literature and conclude that OPEC is an unstable cartel that has, at times, been effective in significantly increasing the price of oil. When the cartel has failed in this exercise, however, the price of oil has collapsed, possibly lower than would have been the case were the market not subject to cartelization. Morriss and Meiners believe that much of the volatility that characterizes world crude oil markets can be laid at the cartel’s doorstep and, as a consequence, “the international market for oil is not a free market.” Fred Smith will discuss the policy implications of Morriss and Meiners’ findings. James Smith, who has written extensively on the OPEC cartel, will comment.