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Department of Economics, University of Oslo Memorandum

No 21/2015:
OPECís market power: An Empirical Dominant Firm Model for the Oil Market

Rolf Golombek (), Alfonso A. Irarrazabal () and Lin Ma ()

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.

Keywords: Oil; dominant firm; market power; OPEC; Lerner index; oil demand elasticity; oil supply elasticity; (follow links to similar papers)

JEL-Codes: L13; L22; Q31; (follow links to similar papers)

48 pages, December 17, 2015

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