The Organization of the Oil Industry, Past and Present

For several decades, petroleum has been a commodity of vital importance to the global economy, in which a number of interesting market phenomena has occurred. This monograph represents my efforts to describe several of these phenomenon, along with a few other elements of the oil market. My focus is on elements related to the extraction of petroleum, and the interactions between buyers and sellers of crude oil; issues that are essentially linked to the Industrial Organization of crude oil markets The topics I cover are: the production of crude oil, material that provides a foundation for later material; an example of the behavior employed by John D. Rockefeller in his quest for control of the early petroleum refining industry; the excessive extraction phenomenon observed in the early days of the industry, which was obtained because of the "common property" nature of oil production; the historical battle between the major oil companies (who were collectively dubbed the "Seven Sisters" and Organization of Petroleum Exporting Countries, or [OPEC]); a theoretical discussion of cartel formation, which forms the backdrop for an investigation of OPEC; an empirical model of membership in OPEC; and a handful of key recent events, which offer some insights into the future of the oil industry.