Publications: Notes at the Margin

Producer Impotence, Analyst Ignorance, and the Transformation from Monopoly to Competitive Market (November 30, 2015)


Oil markets have evolved. Those who follow them have not. Oil has become a competitive market. Prices are set by those with the highest marginal costs. Producers with lower marginal costs produce at full capacity and capture what economists call rents. Oil is the new crop. It is no different from coffee, corn, rubber, soybeans, or wheat. Those who follow the market do not understand current developments because they are ignorant of microeconomics and the history of commodity agreements.


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