Question

There is evidence that Kuwait only has approximately half of the oil reserves that it claims? Why might this be?

		A large quantity of oil was destroyed during the Gulf War of 1991.
		Kuwait has incentives to inflate its oil reserves to increase its OPEC quota share.
		Kuwait has incentives to inflate its oil reserves to make its budget look more sound
		Much of Kuwait's oil has been reclassified as economically unrecoverable.

Answer 1

There is evidence that Kuwait only has approximately half of the oil reserves that it claims? Why might this be?

Answer: Kuwait has incentives to inflate its oil reserves to increase its OPEC quota share.

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Proposed Formula for Allocations

In 1986, OPEC conducted an in-depth analysis of their system of allocating quotas with the view to set up a durable formula, equitable to all members. They defined eight criteria that fall into two categories: oil related and socio-economic. The factors considered were:

• Reserves
• Production capacity
• Historical production share
• Domestic oil consumption
• Production costs
• Population
• Dependence on oil exports
• External debt