Oil market and macroeconomic activity in the industrialized countries
In the oil market, the price inelasticity of non-OPEC supply and demand for oil requires most of the shortrun adjustment to occur through changes in price rather than quantity. This inflexibility of quantity if compounded by the ability of OPEC as a cartel to successfully prevent its nominally quoted official price from declining during periods of excess supply. A model of the shortrun price behavior of OPEC oil, which described the behavior of producers and consumers, is derived and estimated. The resultant spot-price reaction function proves to be highly nonlinear, and oil demand must exceed a critical level of capacity before the spot price begins to rise. This model explains the upward staircasing of nominal OPEC prices. The spot price leads the official price upward. The new official price establishes a higher floor for the spot price. Simulations are used to study the effects of changes in the rate of economic growth in the industrialized countries and the level of OPEC capacity on the price and consumption of oil. The relevant shortrun relationships between the price of oil and the economy, extracted from the literature, are estimated in a two-country model representing the United States and an aggregate of the remaining major industrialized countries.
- OSTI ID:
- 5684735
- Resource Relation:
- Other Information: Thesis (Ph. D.)
- Country of Publication:
- United States
- Language:
- English
Similar Records
Theory and evidence about the structure of the international oil market: 1974-1980; a collection of related essays
Technical analysis of the international oil market
Related Subjects
POLICY AND ECONOMY
02 PETROLEUM
DEVELOPED COUNTRIES
PETROLEUM
MARKET
ECONOMIC ELASTICITY
ECONOMIC IMPACT
ENERGY MODELS
OPEC
PRICES
PRODUCTION
ENERGY SOURCES
FOSSIL FUELS
FUELS
INTERNATIONAL ORGANIZATIONS
OIL-EXPORTING COUNTRIES
294002* - Energy Planning & Policy- Petroleum
020700 - Petroleum- Economics
Industrial
& Business Aspects