Mr. Novak explained that the 11 OPEC states and seven outsiders present during the meeting had spent two months drafting an agreement that would cap oil production at January levels in an effort to stabilize oil prices, and it was all undone by the fact that Saudi Arabia, Qatar, UAE, and "predominantly other Gulf States" insisted that Iran be included in the deal (Iran did not attend the talks).
Monday, April 18, 2016
Is Iran free riding on OPEC?
If OPEC and seven other oil-producing nations agree to cut back output to raise price, this will benefit Iran, the big oil-producing nation who refuses to cut back output. Such ``free riding'' can be modeled as a pricing dilemma. In fact, Iran's free riding seems to have caused the entire agreement to collapse: