Question

(bounds of the firm) ashland oil, inc., buys its crude oil in the market. larger oil refiners, such as texaco, drill for their own crude oil. why do some oil companies drill for their own crude oil and others buy crude oil in the market?

Answer 1

Some oil companies drill for their oil crude oil because they can afford it and a certain stage it adds more value to their business. Furthermore, it's a way of controlling a larger segment of the industry and being less dependent of the uncertainties linked with the supply segment. Other companies which don't drill on their own can't generally afford it. Or it may be that they deem it better for their business to only focus on distribution.