OPECs market power: An Empirical Dominant Firm Model for the Oil Market
Rolf Golombek, Alfonso A. Irarrazabal, Lin Ma
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 signifi cant. We fi nd 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.