This paper examines how economics has contributed to an understanding of the international oil industry. After considering why knowledge of the oil industry is a subject worthy of interest, the paper develops a stylized version of economic methodology. It then tries to apply this to the oil industry. However, the paper observes that in the past, because of secrecy and lack of data, there have been serious problems which inhibit the use of standard methodology. The result has been a tendency among some economists to apply untried theory to the industry with damaging results. The paper then considers how other economists have adopted a different approach and in doing so, have made significant contributions. The paper concludes by considering future avenues for the further application of economic analysis to the oil industry.