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why oil market is monopoly

why oil market is monopoly

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Answer #1

Oil market is controlled mainly by the OPEC (Oil producing and exporting countries). There are two reasons behind thus monopoly:

i. Geographical reasons: Oil is a natural resource which is extracted only in specific locations around the world. Due to this, the countries which control oil feilds can behave as monopolies as oil is a necessity and there are only few players in the market.

ii. Formation of cartels: OPEC is the cartel formed by the oil producing and exporting counties. Due to the formation of the cartel, these countries are able to control the price and quantity of oil and hence behave as a monopoly power.

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