Market Structure and Microeconomic Trends in the Oil and Gas Extraction Industry

Running Head: PRINCIPLES OF MICROECONOMICS
Principles of Microeconomics
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1PRINCIPLES OF MICROECONOMICS
Table of Contents
Introduction......................................................................................................................................2
Market structure of Oil and Gas extraction industry.......................................................................2
Microeconomic trends in the industry.............................................................................................3
Scope of government intervention in the market.............................................................................4
Conclusion.......................................................................................................................................4
References........................................................................................................................................6

2PRINCIPLES OF MICROECONOMICS
Introduction
Operation of an industry is largely attributed to specific characteristics of the industry.
Market structure of an industry is determined by concentration of firms in the industry. The oil
and gas subsector of United State operate under oil and gas field properties. The major activities
of the industry include extraction of oil and natural gas, equipping wells, emulsion breaker,
operating separators and others (census.gov, 2018). The concerned industry is largely
characterized as an oligopoly market. The concerned industry has characteristics similar to that
of an oligopoly market.
Market structure of Oil and Gas extraction industry
An oligopoly market is identified as being dominated by few large players. The major
players in the industry captures a significant portion of market share. As oil and gas industry in
United State is dominated by few large player, it is identified as an operating oligopoly (Baumol
& Blinder, 2015). Following merger and acquisition in the concerned industry there are four
large oil companies in United State enjoying a significant market power.
ExxonMobil, ConocoPhillips, Chevron and Marathon Oil are the four largest oil
companies that dominate US oil industry. The four big companies represent nearly 80 percent of
all Oil and Gas companies in United State. Among the four firms Exxon Mobil has a market
share of 41 percent which is followed by 25 share of Chevron (Shaffer, 2016). The market share
of ConocoPhillips and Marathon are 12 percent and 21 percent respectively.
An important feature of oligopoly market is the presence of high entry barriers. The large
firm heavily invest in research and technology development to reduce cost and increase reserves.
For example, with the objective of maintaining dominant position in the industry Exxon Mobil