ABSTRACT
Since the historic OPEC official price reduction in March of 1983, intermittent speculation has suggested the probability of a total "collapse" in the price of internationally traded crude oil. Oil market behavior under a substantial surplus in productive capacity was a relative unknown. Price adjustments have been required over the last two and a half year period in order to recognize commercial realities. Pressure on light crudes worldwide resulted in the reductions by the British National Oil Corporation, Nigeria and Norway. The OPEC meeting in December of 1984 called for an adjustment in differentials, with the net result a narrowing of the light-heavy relationship. Although OPEC was established in 1960, throughout the bulk of its history it has not even attempted to function as a true cartel, contrary to such characterizations in the Western press.
