Pentroleum Industry As Oligopoly Essay

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Pentroleum Industry as Oligopoly in United States Oligopoly The oligopoly market is a few relatively large firms that have adequate to significant market power and that they recognize their interdependence. Each firm know that their choice of actions or changes in their outputs will have an effect on other firms and in response to the change, other firms will take actions accordingly to adjust therefore will affect its sales and revenue. (Thomas 428) To closely define, the oligopoly characteristics consist of (a) a few large dominant firms; (b) a product or services either standardized or differentiated; (c) firm’s decision on price and output affect the demand and marginal revenue of other firms in the market and vice versa; and (d) the entry barriers to become a dominant firm consist of substantial involvement of technology and economical terms. With these characteristics, there are usually as few as two and as many as ten firms that make up large market shares in any one particular industry. According to U.S. Energy Information Administration website (eia.gov), a crude oil refinery is identified as a collection of many industrial facilities that turns crude oil into petroleum as finished products. Petroleum and oil are used interchangeably. This paper focuses on the oil industry, limited to crude oil and refineries U.S. based companies, is identified as oligopoly in U.S. market due to their market shares and powers. Dominant Firms The oil and gas industry in general is dominated by a few large firms therefore it is set as operating in an oligopoly market. Due to acquisitions in the industry, the four largest oil companies in the United States control the market power. ExxonMobil, Chevron, ConocoPhillips and Marathon Oil d... ... middle of paper ... ...n 2012, the company announced that it would spend $5.2 billion in 2013 for equipment and facilities upgrades and exploration. Soon after, ConocoPhillips recreated its portfolio by creating two public trades firms with different business strategies. In 2012, ConocoPhillips announced focuses on upstream activities while Phillips 66 heads its direction to midstream and downstream activities. The Phillips 66 firm engages in production side of the house such as the refining and marketing and chemicals productions leaving ConocoPhillips to fully focus on research and development and inventions. (Schaefer) Vertical integration. Delta Air Lines, which owned no refining assets, purchased a refinery from ConocoPhillips and now produces jet fuel for its aircraft along with other petroleum products that it does not consume. http://www.eia.gov/todayinenergy/detail.cfm?id=14791

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