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The World Oil Market: Past and Future

Private owners of world oil resources eventually failed to restrain abundance and keep an above-competitive price. The OPEC nations had far greater market power, but overestimated it. Short time horizons drove OPEC nations to raise the price too much. They retreated to a more tenable level. But like all cartels, they find it hard to reconcile group welfare with short-run individual interest. Oil continues abundant, so far. The main obstacles to noncartel expansion are man made such as taxation and state companies. They are very slowly yielding. Depending on how fast they erode, world supply will grow, and price pressure will be downward.

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Energy Specializations: Petroleum – Markets and Prices for Crude Oil and Products

JEL Codes:
L13 - Oligopoly and Other Imperfect Markets

Keywords: World oil market, OPEC, Market power, oil prices, oil supply

DOI: 10.5547/ISSN0195-6574-EJ-Vol15-NoSI-2

Published in Volume 15, Special Issue of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.