Two Flavors of Market Power

A cartel needs market power, and the bigger the cartel, the more market power it has. Double the market share of a cartel and its market power quadruples! At least that’s the standard economic analysis. If OPEC countries act together they can exercise about ten times as much market power as Saudi Arabia by itself. That’s why OPEC’s organized—not because they like each other.

The United States has twice as much market share on the consumer side of the market as Saudi Arabia has as a producer. The biggest four consuming nations alone have a larger share of consumption than all of OPEC has of production. In short, the consuming nations could have just as much market power as OPEC—if they organized.