Oil Prisoner's Dilemma Analysis

Here is an article about a real-life prisoner's dilemma that was analyzed almost 3 years ago in the midst of the Wall Street crash. The "prisoners" were OPEC + Russia and they had been making big bucks around the turn of the century. Demand for oil was increasing much faster than supply (because it is time-consuming to develop new fields to extract more oil); price was increasing non-linearly while the average cost of extracting oil to produce was barely increasing. This article states that this scenario was "bad for freedom" because wealth was being transferred from mostly democracies to mostly dictatorships. Dictators in places like Libya, Venezuela, and Iran were getting huge foreign currency reserves. But then Wall Street crashed.

The demand for oil plummeted. The economies in these producing countries started to crash too, and we all remember the global crisis that ensued. Here is the prisoner's dilemma: if OPEC + Russia collectively decided to decrease their extraction, they could limit supply and control price to increase it and we'd all be better off! But, each of these 13 members would be the best off if 12 members complied, but they could cheat and kept production the same. Therefore, there was little incentive for any one country to decrease production. Keeping extraction the same was the dominant strategy equilibrium in 2008. This global oil prisoner's dilemma could account for the lack of economic recovery that we still see today if the production companies followed the dominant strategy equilibrium. Maybe you should go buy a hybrid and hope OPEC starts cooperating in the meantime?