Author(s): Falih Ngaimesh Mutar Zubaidi, Yousif Abdullah Abed Al- Ani
Oil is a strategic commodity with low elasticity and cheap fuel for most activities in the world which means increasing demand for it. However, this demand has been subjected to numerous ups and down, especially since the oil supply is not elastic in proportion to any significant increase in the volume of demand, and this led to economic problems for oil countries and fluctuation of their fiscal revenues dependent mainly on oil production and export.
The global oil market is considered an oligopoly market and oil revenues are high compared to the costs of its production because the average fixed costs are higher than the average variable costs. Also, considering the oil market as an oligopoly market is due to the high value of the equipment and the small number of manpower employed to extract oil compared to the rest of the industries and this is an advantage for large companies and small companies cannot compete with or enter the market and therefore they achieve great profits due to higher returns compared to production costs, The OPEC founded in 1960 is an example of an oligopoly market.