Non-Renewable Resource Cartels : Who's in the Club?

In this paper, we analyze the question of membership in a non-renewable resource cartel, with specific application to OPEC. Using a simple model of a non-renewable resource market, we show that the benefits of cartel membership are related to the size of remaining reserves. Domestic petroleum consumption will also influence the incentives to join the cartel if countries care about consumer interests. Using data on reserves and consumption for all oil producing countries, we show econometrically that larger reserves and lower consumption are positively associated with OPEC membership. Our regressions correctly predict membership for the vast majority of oil-producing countries