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OIL HAS BECOME queen of the fossil fuels, surpassing 'king coal' in 1968. Although turbulent oil markets and rival fuelscoal, gas and electricityhave prevented it from reaching the ascendancy coal had for decades, nevertheless it has been, and remains, the most important primary global energy source, with more than 30 per cent of the world market. With stable and secure markets, its ease of transport and flexibility in use should cause it to remain among the most important of the primary energy sources. However, stable and secure markets require that capacity grows in line with market demand, which requires that producers understand oil market demand.The largest potential oil market, but the one we know the least about, is the developing world. This has more than three-quarters of the world's population, but less than 25 per cent of global oil demand. Since its economies are among the most dynamic in the world, a better understanding of its oil consumption patterns will be useful in providing the necessary investment in production, transportation and refineries to meet its growing needs.This paper seeks to provide a better understanding of oil demand in the developing world by surveying the existing econometric work on total oil demand in section 1, and oil demand by major sectorindustrial. residential, commercial and transportationin section 2. The conclusions are contained in section 3.

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Conventional wisdom holds that OPEC is a weakly functioning cartel with non-OPEC producers forming a “competitive fringe.” However, several studies have challenged the cartel hypothesis for OPEC with a few even challenging the competitive hypothesis for non-OPEC producers. In this paper, we test competing hypotheses (which include dynamic optimization, targetrevenue, competition, cartel, and swing production) for production decisions for both OPEC and non-OPEC producers. Recently developed cost data allow these tests to be done on the most general model to date. In our tests, we find no evidence for dynamic optimization. Formal target-revenue models are rejected, but there is some evidence that revenue targeting may influence production for some OPEC countries and a few non-OPEC countries. We find no evidence that any of the OPEC countries behave in a competitive manner. More surprisingly, we find no evidence that the fringe is competitive. Using cointegration tests, we are unable to find formal evidence of coordination in the form of strict cartel behavior or swing production among OPEC countries. Taken as a whole, the evidence suggests that loose coordination or duopoly is most consistent with OPEC behavior.

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