Publications: Notes at the Margin

The Return of the "Rule of Capture" (March 7, 2016)


It is a different world in 2016 for oil producers in terms of market power or, more correctly, the lack of it. Today, refiners have an abundance of coking, desulfurization, and hydrocracking capacity. Their increased refining flexibility has eliminated the market power of key Middle Eastern countries, as have the alternative supply sources provided by the surge in light crude from fracking. The "rule of capture" once again is driving the oil market. Ninety years ago the rule of capture applied to crude oil production. Today it applies to markets as producers scramble to find buyers for their oil, offering lower and lower prices. This week we discuss the current rule of capture in depth along with its implications.


To request subscription information for Notes at the Margin, please Contact Us or send us an Information Request.