IMPACTS OF NEW TECHNOLOGY ON MARKET POWER: THE CASE OF THE PETROLEUM INDUSTRY

Abstract

This dissertation studies the recent developments of oil market and seeks to reassess the market power position for the major oil market participants in global crude oil industry (U.S. vs. OPEC). It investigates the role of new technology “fracking” in determining if a potential market power excretion in U.S. petroleum industry exist. Also, it looks in depth into the organization of Petroleum of Export Countries (OPEC), and evaluates and investigates the extent to which OPEC can still influence the oil market in the post fracking world. Our findings reveal that the U.S petroleum industry operates under imperfect competition, and there is a significant degree of monopolistic market power in both upstream and downstream industries. In addition, fracking technology has remarkably increased market power in the U.S. domestic crude oil market at the expense of exporters of crude oil shipped to U.S. Further, the study found that OPEC meetings have an impact on price fluctuations around OPEC meetings in comparison with other random dates that we have simulated. The results suggest that OPEC decisions aim to stabilize oil prices around fair equilibrium price in both short and medium run rather inflate. Last, OPEC+ is a vi crucial coalition to stabilize oil prices and without OPEC+ agreement; oil prices may expose to low equilibrium price.