The evolution of energy markets over time: An examination of OPEC, the Seven Sisters, and oil market dominance through the use of evolutionary game theory and agent-based modeling

The overarching agenda of this work is to develop a methodological toolkit to contend with a class of applied problems, particularly within energy economics, in which behavioral economics and game theory intersect. Specifically, this work intends to address problems, both in energy applications and throughout economics, in which boundedly-rational agents driven by heuristics and emotion interact in dynamic, strategic situations. This type of problem is not currently addressed using orthodox economic modeling techniques, and because many issues within energy meet the above criteria, the intertemporal development of energy markets is not thoroughly understood. To provide a means to examine this class of problem, I combine evolutionary game theory and agent-based modeling into one comprehensive methodological toolkit. Then, I examine one historical example within the energy industry that is anecdotally well known but theoretically unexplained to shed insight into a long-standing puzzle and to calibrate this new toolkit. That is, I study the evolution of petroleum markets during the 1960s and 1970s, focusing on the struggle between the Seven Sisters major oil firms and OPEC nations as they grappled for control over prices and production. In terms of construction, I first provide an introduction to the dissertation, and I then offer a historical exposition of the epoch of interest. Next, I examine evolutionary game theory and agent-based modeling individually as methodological tools within the social sciences. I then examine the historical period through applied evolutionary game theory and agent-based modeling. Subsequently, I argue for the advancement of economics as an evolutionary science and justify the use of this toolkit by examining the applied energy problem through traditional game theoretic approaches. Lastly, I provide a conclusion. The first contribution of this work to the literature is that this methodological toolkit has not been utilized to address applied problems within economics. The second contribution is pursuing the study of the unexplained type of problem mentioned above that includes the evolution of energy markets. Since the struggle between OPEC and the Seven Sisters is not sufficiently theoretically understood, the use of this toolkit to address this specific example is the third contribution of this dissertation. In short, I combine two innovative techniques, and I select an archetypal energy problem as a mean to calibrate this new methodological toolkit to test and prepare it for future work in the study of energy markets.