The Limits of OPEC in the Global Oil Market 605 First Test:Does Joining OPEC Affect Oil Production? The first test of OPEC as a cartel is the impact that the organization has on the oil production rates of new members.I adopt a before-and-after methodology,following the event history approach used by Rose in his evaluation of the WTO on its members'trade levels.41 If OPEC has a constraining influence on oil production, states that join OPEC should have a decreasing or decelerating oil production rate. Conversely,states that leave OPEC should have an increasing oil production rate. There is scant evidence that OPEC has such an effect.Figure 1 shows the average oil production rate of all states in the five years before they join OPEC and the five years after they join OPEC.Each state's oil production is standardized to a value of 100 in the year that it joined OPEC so that the relative increase or decrease can be compared.As the graph shows,the average production rate increased at almost an identical rate before and after the state joins OPEC-thereby providing no indication that OPEC has constrained oil production. 160 140 0m001 120 100 40 20 0 Pre5 Pre4 Pre3 Pre2 Prel. jPostI Post2 Pos Pos4 Posis Years before/after the state joined OPEC FIGURE 1.Impact of joining OPEC on oil production Two Tests on the Impact of OPEC Quotas The second test focuses on cheating.A strong cartel would have little cheating,but in OPEC cheating is endemic.During the period 1982-2009,the organization as a whole overproduced a staggering 96 percent of the time.I use monthly production seems unlikely that OPEC is simply trying to stabilize prices without increasing their own profits-even its members do not make that claim. 41.See Rose 2004 and 2007:and Goldstein.Rivers.and Tomz 2007.First Test: Does Joining OPEC Affect Oil Production? The first test of OPEC as a cartel is the impact that the organization has on the oil production rates of new members. I adopt a before-and-after methodology, following the event history approach used by Rose in his evaluation of the WTO on its members’ trade levels.41 If OPEC has a constraining influence on oil production, states that join OPEC should have a decreasing or decelerating oil production rate. Conversely, states that leave OPEC should have an increasing oil production rate. There is scant evidence that OPEC has such an effect. Figure 1 shows the average oil production rate of all states in the five years before they join OPEC and the five years after they join OPEC. Each state’s oil production is standardized to a value of 100 in the year that it joined OPEC so that the relative increase or decrease can be compared. As the graph shows, the average production rate increased at almost an identical rate before and after the state joins OPEC—thereby providing no indication that OPEC has constrained oil production. Two Tests on the Impact of OPEC Quotas The second test focuses on cheating. A strong cartel would have little cheating, but in OPEC cheating is endemic. During the period 1982–2009, the organization as a whole overproduced a staggering 96 percent of the time. I use monthly production FIGURE 1. Impact of joining OPEC on oil production seems unlikely that OPEC is simply trying to stabilize prices without increasing their own profits—even its members do not make that claim. 41. See Rose 2004 and 2007; and Goldstein, Rivers, and Tomz 2007. The Limits of OPEC in the Global Oil Market 605