While oil prices are falling today due to the oversupply by new supply zones discovered in the United States of shale, it is important to look back upon the one cartel, which has far outlived the average life of a cartel, the
OPEC.
While the OPEC is one of the most successful cartel till present times, it is beginning to dry out and the oil is no more as clean and smooth as the organization would imagine it to. It appears that it is becoming an organization with fading relevance cause its organizational structure is no longer working: it is more or less just being dragged along by Saudi Arabia while the other members continue to not follow all guidelines and quotas with discipline.
Looking at it from an OB point of view, OPEC is like a company with all the employees looking to maximize their personal profits from the organization as well as independently. In such a situation, what should an organization do when all the employees are looking to increase their profits without the collective growth of the organization?
In such a situation, it would be ideal for OPEC to reform its organizational structure to change the hierarchical setup and re-consider their existing chains of commands and span of control that the governing bodies in OPEC have and re-define a lot of terms on the OPEC agreement between member nations that was signed decades ago, to make them relevant to present times with the current oil status.
Secondly, OPEC must try to adopt either a reward system or a way to compensate the member states in addition to reasonable quotas so that the members can work within the limits of OPEC and not need to ignore the quotas to increase their personal gains outside the OPEC.
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Reference:
http://www.reuters.com/article/us-global-oil-idUSKBN17501U
http://finance.yahoo.com/news/end-opec-near-230000278.html
