ABSTRACT
This chapter aims to present an historical survey of changes in the industrial structure of the international oil industry (IOI) since 1945. It examines why the industry structure is important and provides empirical justification for the earlier assertions of excess capacity and low marginal cost. It also examines the way in which the horizontally integrated structure of the industry controlled the excess supply up until the early seventies and then what subsequently replaced the structure. Finally, it discusses the role of vertical integration in the context of excess capacity and low marginal cost. The importance of industry structure arises from two characteristics of the IOI, excess capacity and low marginal cost. The 101 exhibits remarkable continuity in terms of the problems which have been created by excess capacity over time. The existence of vertical integration clearly encouraged the control of the excess capacity.
