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As monopsony buyers, the Seven Sisters control the price of crude oil; however, maintaining the stability of price was a challenge due to several factors. Firstly, the larger the number of firms, the harder it is to control the price. When in 1958 Russia (outside the Seven Sisters) was entering the industry due to the increasing oil production, as a new entrant, Russian cuts its oil price without a collusion with the Seven Sisters; Russia’s cutting price led the Seven Sisters into matching the price change and thus entering into a price war. The price of crude oil falls drastically in an instant. An addition number of firm makes it hard to collude.








Another incident is after the OPEC was created, the increasing production due to the major new finds in Algeria, Nigeria, and Libya increased the supply and price continued to fall. As new entrants, for gaining market share, the three new countries (firms) bring down the price even more. In the demand supply market, a shift of Supply curve to the right lowers the price.

In 2006, the OPEC trying to bring up the price of crude oil and maintaining it require a reduction of output from firms. The reduction of output in the demand-supply graph, shifts the supply curve to the left, and thus will increase the market price. However, the difference in cost and demand of each country production varies; cutting the same amount of output in the country might affect each country differently. The under producers like Indonesia and Iran who struggled to meet their quotas required the heavy producers to cut their output more sharply in order for the price market to be in its targeted price market. Thus Saudi Arabia being in a heavy-producer category argues that by cutting the output of price with the falling price might bring greater revenue loss to the country’s economy.

In 2008, when the oil price has peaked to $147.27/barrel, the...