The world oil market is not one great pool: A reply to Rodriguez and Williams

In a paper by Rodriguez and Williams (Energy Studies Review, 1993), the case for a single-pool world oil market is put forward. Criticisms of the assumptions and conclusions are offered. To counter the paper's assumption that antitrust is the relevant metric for measuring the extent of geographic markets, it is argued that for energy security policy decisions, it is the economic market which matters. The paper does show that the world oil market is indeed unified in the long run, but this is not relevant to the short term, the relevant time-frame for energy security decisions. The paper's choice of spot market data for its cointegration analysis is also criticized by using several examples of pricing decisions that would not make sense in a unified world market but which do make sense in a regionalized market. It is also unclear how representative spot prices are of the oil market. Finally, the conclusions of the paper that favor policies focusing on secure vs insecure import sources and supplier diversification are seen as unsupported by the paper's statistical findings. 15 refs