ABSTRACT
This chapter examines the causes of this sudden shift in market equilibrium, the role of Organization of the Petroleum Exporting Countries (OPEC), and the implications that the new situation may have on political stability in the Middle East and North Africa region. It begins with a theoretical discussion, which aims to clarify why the oil market is subject to sudden and large changes in prices, and the role of limited information. This is necessary to properly understand the root causes of the current price war, the role of OPEC, and the shift in the strategic outlook of major oil-exporting countries since about 2011. OPEC's share of global oil production declined rapidly, hitting a low of 27.6 percent in 1985. In an oligopolistic market – which is the most common market structure for manufactured products and main raw materials, including oil – price is determined by the few producers with the largest market shares.
