Many recognize the Organization of Petroleum Exporting Countries (OPEC) as a cartel for its behavior in manipulating oil prices through production. Cartel theory states that members of the cartel do not change their production levels if a member experiences a production shock, or a sharp decrease in production caused by an outside event. This paper examines evidence that suggests that OPEC is a cartel based on those shocks and their production data. The analysis focuses on the Iranian Revolution, the Persian Gulf War, and the Venezuelan Oil Strike which caused a sharp decrease in OPEC’s oil production, specifically in Iran, Iraq, Kuwait, and Venezuela. When one of the member countries experiences a shock, then there is a significant change in production by OPEC, however the magnitude is small in comparison to the total amount of oil produced.
