24 November 2017


Wikipedia defines OPEC as an intergovernmental organisation which attempts to coordinate the petroleum policies of member countries. In practice, most consider OPEC to be a cartel, trying to maximise profits by agreeing production quotas.

Is it helpful for a cartel to have a leader? Economics tries to answer this question using game theory, but it’s not clear how helpful that approach is. Conditions prevailing in the real world are typically too complex to be captured by current game-theory models. Simple psychology suggests the answer is: yes, having a leader makes it easier to coordinate behaviour.

Roughly speaking, OPEC countries’ petroleum represents about half of the global total, and Saudi Arabia controls about a quarter of that. By comparison, the next biggest members in terms of production, Iran and Iraq, each generate about a tenth of OPEC’s output.

Saudi Arabia has no formal leadership status. OPEC’s chief executive from 2007 to 2016 was Abdalla Salem el-Badri, a Libyan. Yet in practice Saudi Arabia seems to play a dominant role in OPEC’s decision-making. It is therefore sometimes said to be OPEC’s “de facto leader”.

de facto here means:
- actual or in practice, while not corresponding to the legal or formal framework
(More examples of usage at dictionary.com)

In a recent Reuters article, de facto appears to have got Chinese-whispered into defector:

OPEC’s defector leader is focused on reducing global oil stocks
D’oh! Interestingly, six months earlier, Reuters was still getting it right.*

* In the earlier article, Reuters spells the phrase “de-facto leader”. Hyphenating compound modifiers is usually desirable, as it helps to avoid ambiguity. When, as in this case, the modifier is a foreign phrase, a hyphen seems superfluous.