A model of the world oil market with an OPEC cartel

A world oil market model (WOM) with OPEC treated as a Stackelberg cartel has been developed within the framework of the Generalized Equilibrium Modeling System (GEMS) that is available from Decision Focus, Inc. The U.S. sector of the model is represented by a Liquid Fuels Supply model that was presented previously. The WOM model is described and results obtained with the model for the period 1980–2040 are presented. For comparative purposes, results obtained with the model when OPEC is treated as a competitive producer are also presented. By comparing the world oil price as a function of time from the two calculations, the influence that OPEC may have on the oil market by exploiting all of its market power is quantified. The world oil price as obtained with the WOM model is also compared with world oil price projections from a variety of sources.