The international petroleum market : some behavioral options

Abstract

This thesis describes a behavioral model of the international petroleum market and presents the results from it. The purpose of this study is to develop a framework for analysis of the implications of the likely degree of non-competitive behavior to be observed in the international petroleum market. The focus of the model is on the market strategies that may be pursued by the world's oil exporters on a joint or an individual basis. The structure of the model is designed to combine features of formal modelling and of informal "story-telling" in a consistent framework. Such a structure requires a simulation type model. The "stories" that are being told are constructed from cartel theory, from the empirical evidence on previous commodity cartels, and from the special characteristics of the individual oil exporters. The model described is evolutionary in the sense that each exporter is assumed to behave according to a set of decision rules which may reflect a competitive market structure, a monopolistic market structure, or any combination of the two. The change of the decision rules being applied provides for the evolution of the market price. An attempt has been made to combine the merits of formal competitive and monopoly models with those of the informal "story-telling" approach. The price- and quantity-paths consistent with the various "stories" over the period from 1974 to 1990 are reported.