Publications: Notes at the Margin

Market Power and Crude Prices (April 2, 2012)

 

Market power is a concept from microeconomics. A firm has market power if, by cutting sales a little, it cans raise the price of a good sufficiently to increase its profit. Some oil-exporting countries and some companies such as Exxon, Shell, and Total enjoy market power at times. These opportunities occur when OPEC surplus capacity has been absorbed. This report describes, among other things, how oil firms and oil-exporting countries with market power can, if they so desire, boost their revenue and help sustain high oil prices with relatively minor actions.

 

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