We investigate the exertion of market power in the global crude oil market over the past years. Recognizing the difficulty of identifying market power in the crude oil market by empirical studies, we propose a numerical partial equilibrium model formulated as a mixed complementarity problem. Our approach allows for strategic behavior in a Nash-Cournot market, a Stackelberg leader-follower game, an OPEC oligopoly or cartel, as well as perfect competition. To take account of liquid spot markets, the model specifically includes arbitragers to capture the effect of global crude oil market integration. Our results indicate a market structure shift over the past years. Reported quantities and prices before the 2008 turmoil are close to those derived from a Stackelberg market simulation, with Saudi Arabia acting as Stackelberg leader vis-a`-visa non-cooperativeOPEC oligopoly and a competitive fringe. However, in 2008 and 2009, observed prices are closer to the competitive benchmark. We conclude that OPEC suppliers’ ability to exert market power was reduced in the 2008 turmoil and its aftermath.
