ABSTRACT
Posted or fixed pricing by suppliers of intermediate inputs into the oil-gathering (exploration, development and production) business is, generally, not practised. The oil companies, therefore, can do relatively little comparative ‘shopping’ or searching for bargains offered at fixed prices by rival suppliers. Nor do flexible-price commodity exchanges exist for any intermediate inputs into offshore oil gathering. Nor, again, is face-to-face negotiation over prices of any importance. Rather, as we have already seen, the oil companies put out to competitive tender virtually all purchases above just a few thousand dollars. In fact, these purchases will total millions of dollars during the economic life of a single offshore oil field. The unique competitive auction arrangements – the invited tender-bid auction – that the oil companies employ for procurement purposes is the dominant market form in offshore oil gathering.
