Supply and Demand
OPEC Simulation
Mr. Jones
Global Issues – Periods 2 & 8
Thursday, October 25, 2007
What is OPEC?
• OPEC stands for the Organization of
Petroleum Exporting Countries.
• OPEC works to regulate worldwide prices on
oil. OPEC members sell their products to
the United States, Western Europe and Asia.
• By working together, they regulate how
much oil is available for sale and thus the
price.
Petroleum = Oil
Simulation Procedure
• Your group represents an OPEC member country.
• You will be given a game sheet. On this sheet,
which we will review in a moment, you keep track
of how much oil you sell, the price that you get for
it, and then your total profit for each year (turn).
• In order to earn a point, you must reach your
yearly earnings target. This information is listed
on your sheet and should be kept confidential.
• Your group must elect a spokesman to talk to
other member countries.
Brazil
Number of untapped barrels of oil that exist under Brazil:
Maximum barrels of Oil that can be produced per year:
Earnings target for each turn:
Sample Game Card
12 Million
2 Million
$20 Million
Points
1
Point each turn that you reach your yearly earnings target
5
Points if you reach your yearly earnings target 7 out of 10 turns
1
Point for every 1 million barrels of Oil on reserve at the end 10 turns.
1
Additional Point for each turn when your round’s earnings exceed $30 million.
2
Additional Points for each turn when your round’s earnings exceed $35 million.
Point Value of Reserves at Start of Game:
Turns
1
2
3
4
5
6
7
8
9
# of Barrels Produced
Price Per Barrel
Total Earnings
Reach Earnings Target?
Total Points Earned in Round
Barrels Left in Reserve
Total Points from Earnings:
Total Points from Reserves:
Total Points from Game:
10
Tips
• Remember -- While you are a member of OPEC,
your first goal is to win! This is the same goal that
member countries have: to maximize profits and
meet their earnings targets.
• You should discuss your strategy together as a
class and within your own groups. When it comes
time for you to sell your oil that is done via a
secret ballot with the oil baron (Mr. Jones). Your
ballot should list your country name and the
number of barrels of oil that you are selling.
Economic Principle: Collusion
• “Collusion" takes place within an industry
when rival companies cooperate for their
mutual benefit.
• Companies work together to set prices for
consumer. Prices are no longer dictate by
the rules of supply and demand, where
companies compete with each other for
customers and thus have to price
competitively. Is this fair for the consumer?
Economic Principle: Free Rider
Effect
• The “free rider” effect takes place when a group
colludes. Often, one member of alliance works
to his or her own individual benefit and takes
advantage of the fact that he or she knows what
the other agents involved are playing to do (due
to collusion).
• The free rider than takes advantage of the
artificial price set by his or her otherwise wouldbe competitors and uses it to his or her own
gain.