Volatility of Oil Price and Instability of Oil Market around OPEC : Any Lessons for Korea?

Insatiable oil demand contributes to its price up. As oil is becoming scarcer, its price has been widely fluctuating. This study examines the mechanism of OPEC, focusing on the oil price volatility along with its critical determinants. OPEC has played its role by controlling the relative balance of power with non-OPEC nations since its inauguration. There are factors affecting the oil market instability: that is, conflicts between OPEC and non-OPEC nations, speculative behaviors, and petronationalism. Based on these factors, the study concludes with some lessons for South Korea to prepare for the post petroleum era. To this end, South Korea as an oil-consuming nation should redefine the role of OPEC not merely as an oil cartel but as an organization of group of nations with different geography as well as socio-economy. The South Korean government also requires to diversify the raw materials in domestic industry as countermeasures against unexpected oil price swing.