Overview of the Oil Market – This section is going examine the history of the oil market for a time span of 40 years. This will help in creating a strong foundation in discussing the new economics of oil; shale versus Kuwait. Many economists globally have tried to explain two major developments in the oil market history. Firstly, in 1973, after unsuccessful attempts to raise the oil prices, the oil-producing countries grouped together and successfully raised the oil prices under the OPEC emblem.

Secondly, the contractual agreements between the governments and the oil producing companies have been established over the number of years. Analysts in the oil market argue and contrast the incentives of companies and governments, and categorically explain the need for transfer of the total supply from one group to another. For example, the relationship between the government and oil companies may have different benefits and cost.

In many countries where oil is produced in abundance, foreign companies sign contracts to extract oil although many of these companies have lost control of the total output in recent years (Barsky, & Kilian, 2004). Additionally, the terms and conditions of these contracts tend to influence heavily on the supply side and the oil prices. This section focuses specific events from the year 1945-to the present.