Oligopolistic Nature of Oil
We all always have, knowingly or unknowingly, discussed amongst ourselves various types of markets. We often use these terms very loosely. Before we move to understand oligopolistic nature of oil. Let’s understand some basics. To start with, there are three forms of market structure.
- Monopoly – This can be defined in simple words as the absence of competition. A single company or a group totally or nearly owns all markets for a particular type of product or service.
- Perfect Competition – In perfect competition, there is a presence of various firms. No restrictions on entry or exit of firms. The product is homogeneous, and if one dominating company changes its price structure then other firms have to change their prices in order to remain in the competition.
- Oligopoly – oligopoly is a type of market structure in which there is a very small number of firms that have maximum market share. Every firm is well aware of the actions of other firm and decisions are made according to that.
As the oil and gas industry is considered a perfect example of an oligopoly type of market, we will mainly focus on the oligopolistic nature of oil.