Question

In 2007, some countries that export natural gas discussed forming a "Cartel", modeled on the OPEC oil cartel. The head of Libya's energy sector was quoted saying: "we are trying to strengthen the cooperation among gas producers to avoid harmful competition"

What is a cartel and what do you think is meant by "Harmful cometition"?

Answer 1

A cartel is an association of manufacturers or suppliers with the purpose of maintaining prices at a high level and restricting competition but a cartel has less command over an industry than a monopoly.The major categories that defines how cartel conduct themselves are price fixing ,output restrictions,market allocations.we can take the example of OPEC to understand harmful competition .OPEC consists of 14 countries who are oil exporting whose mission is to co-ordinate and unify petroleum policies of member countries and ensures stabalization of oil market but it has to decide on its output quota in order to strike a balance between demand and supply so to ensure price high .Had there be no cartel than the oil exporting countries be involved in price war and increasing output to increase revenue.