Publications: Notes at the Margin

Crude Oil Markets: Most Competitive in 30 Years (April 28, 2025) 

 

As measured by the Herfindahl-Hirschman Index of industry concentration, global crude oil markets today are more competitive than at any time since January 1993. Such competitiveness makes sustaining high prices extremely difficult. Yet, for over two years, the oil producer group known as OPEC+ or the “alliance” has kept prices well above levels that might otherwise prevail. However, their success may be about to end as major oil companies pressure Kazakhstan to break with the organization.

 

Data on competitive conditions in the oil market suggest that prices could drop quickly to as low as $30 per barrel should the pressure on Kazakhstan lead to a price war. Worsening economic conditions caused by the United States’ ill-conceived trade war and increasingly competitive world market conditions will likely prevent oil-exporting countries from stopping the current price decline as they did in 2020.

 

Oil producers now confront what looks more and more like an ultracompetitive agricultural market in which they have little power to move prices without strong government intervention, and today the key world authorities want lower prices.

 

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