In this paper I investigate how MarxÕs theory of competition and market value formation can be used as alternative theoretical framework for the modeling of oil prices and oil producer behavior. The objective of this investigation is to understand the challenges faced by National Oil Companies from developing nations in attempting to balance the political demands of their governments with the need to be commercially competitive. In section I, I review MarxÕs methodology in developing his theory of competition and market value formation and argue that the conventional interpretation of MarxÕs theory of rent has neglected MarxÕs emphasis on demand and competition in his analysis of market value formation in rent-producing sectors. In order to address this problem I analyze a numerical example in Theories of Surplus Value II where Marx shows that the regulating conditions of production in rent-producing sectors are determined by demand and the competitive supply from producers located in all types of land. In section II, MarxÕs theory of competition and market value is used to outline an alternative model of oil price determination and oil producer behavior. Oil prices are modeled as being determined by market values and these are in turn assumed to be determined by demand and the competitive interaction between high-cost (non-OPEC) and low-cost (OPEC) oil producers. However, since the oil industry is a rent-producing sector, the competitive behavior of oil producers is modeled as a function of whether they own or rent the oil reservoir. Oil producers who own the oil reservoir (National Oil Companies) and who enjoy unlimited free access to more favorable natural conditions are assumed to adopt a competitive strategy of oil supply different from oil producers who have to pay a rent (International Oil Companies) and have limited access to less favorable natural conditions. The competitive interaction between these two groups of oil producers is theorized within the context of oil price cycles under changing and unexpected market conditions. The paper concludes by discussing the challenges faced by National Oil Companies in developing nations in their competitive struggle with International Oil Companies while attempting at the same time to be engines of growth and development to their own economies.