ABSTRACT
The study of Organization of Petroleum Exporting Countries (OPEC) behavior has become a big-time business for academics, consultants, and political risk analysts. Not only are the oil companies and banks willing to pay for studies that attempt to explain OPEC behavior, but also governments have sponsored many studies to unravel the magic of OPEC decision making. OPEC's new challenges in the 1980s will put to test the fundamental strength of the organization and its membership's resilience. As the events of the early 1970s gave OPEC worldwide recognition of its new power over the world's economic well-being, the power structure within the organization itself underwent a series of structural changes. OPEC nations respond to a combination of three factors: the oil market, policy/political constraints, and physical constraints to oil production and exports. The indexation arguments and the argument for pricing oil at market/spot rates go in cycles, depending on the status of the market when such arguments are brought forward.
