Oil and its markets

Oil markets are extremely complex, characterized by an interplay of economic, political, technological and ecological issues. The paper begins by pointing to the high ratio between fixed and variable costs as a characteristic of the oil sector in all its production stages. Then the story of the sector is sketched, since the expansion of Rockefeller’s Standard Oil Trust in the late Nineteenth century. Anti-trust intervention and collusion characterize the first part of the story; the notion of “trilateral oligopoly” (oil companies, producing and consuming countries) is then utilized in interpreting the developments since the Second World War. An illustration and a critique of the role played by financial markets in the determination of oil prices is accompanied by a critique of the theories interpreting oil prices as determined by its nature as a scarce natural resource. Recent trends in the oil sector, with the development of shale oil, are briefly considered