In the late 1990s, Reliance spent $6 billion to build a world-class oil refinery at Jamnagar, India. Now Reliance is more than doubling the size of the facility, which will make it the world’s biggest producer of gasoline—1.2 million gallons of gasoline per day, or about 5% of global capacity. Reliance plans to sell the gasoline in the United States and Europe where it’s too expensive and politically difficult to build new refineries. The bulked-up Jamnagar will be able to move the market and Singapore traders expect a drop in fuel prices as soon as it’s going at full steam.
a. Explain why the news clip implies that the global market for gasoline is not perfectly competitive.
b. What barriers to entry might limit competition in this market and give a firm such as Reliance power to influence the market price?