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OPEC’s market power: An Empirical Dominant Firm Model for the Oil Market

Author

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  • Golombek, Rolf

    (Ragnar Frisch Centre for Economic Research.)

  • Irarrazabal, Alfonso A.

    (BI Norwegian Business School)

  • Ma, Lin

    (School of Economics and Business, Norwegian University of Life Sciences)

Abstract

We estimate a dominant firm-competitive fringe model for the crude oil market using quarterly data on oil prices for the 1986-2009 period. All estimated structural parameters have the expected sign and are significant. We find that OPEC exercised market power during the sample period. Counterfactual experiments indicate that world GDP is the main driver of long-run oil prices, however, supply (depletion) factors have become more important in recent years.

Suggested Citation

  • Golombek, Rolf & Irarrazabal, Alfonso A. & Ma, Lin, 2015. "OPEC’s market power: An Empirical Dominant Firm Model for the Oil Market," Memorandum 21/2015, Oslo University, Department of Economics.
    • Handle: RePEc:hhs:osloec:2015_021
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    More about this item

    Keywords

    Oil; dominant firm; market power; OPEC; Lerner index; oil demand elasticity; oil supply elasticity;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices

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