Abstract:This paper estimates a dynamic model of the world oil market and tests whether OPEC countries colluded and whether non-OPEC countries behaved oligopolistically over the period 1970-2004. The model generates estimates of the shadow price of the resource with minimal functional form assumptions. Results support oligopolistic behavior among non-OPEC producers and collusion among OPEC producers except in the last 15 years. The shadow price does not rise monotonically, which is evidence for stock effects in extraction costs. The recent rise in the shadow price reflects the rising economic scarcity of oil.