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Author Holz, Franziska ♦ Huppmann, Daniel
Source EconStor
Content type Text
Publisher Verein für Socialpolitik
File Format PDF
Language English
Subject Domain (in DDC) Social sciences ♦ Economics
Subject Keyword crude oil ♦ market structure ♦ cartel ♦ simulation model ♦ price indices ♦ Oligopoly and Other Imperfect Markets ♦ Mining, Extraction, and Refining: Hydrocarbon Fuels ♦ Energy: Demand and Supply; Prices
Abstract This paper investigates the existence of market power and the sequentiality of games in the crude oil market. In particular, we examine whether Saudi Arabia acts as a Stackelberg leader or in a simultaneous-move framework, in a number of market power scenarios ranging from perfect competition to cartel. We develop a numerical simulation model that is formulated as a complementarity problem, allowing for the possibility of strategic interaction between the players. In contrast to other partial equilibrium models of natural resource markets, the model proposed in this paper explicitly takes into account the influence of price pools such as Brent and WTI where arbitrageurs exploit price differentials that are not justified by transport costs. Our results indicate that all suppliers exert market power while Saudi Arabia acts as Stackelberg leader. More specifically, we find that OPEC members do not act cooperatively, i.e. they do not maximise joint profits. Rather, they exhibit strategic non-cooperative behaviour, rejecting the notion that OPEC is a cartel.
Part of series Beiträge zur Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie - Session: Oligopolistic Competition and Network Formation xF9-V1
Learning Resource Type Article
Publisher Date 2010-01-01
Publisher Place Frankfurt a. M.
Rights Holder