Analysis of the impact of a one million barrel per day demand reduction on world oil prices

Technical Report · Thu Oct 12 04:00:00 EDT 1978

OSTI ID:6328515

Rodekohr, M E; Kilgore, W C

An analysis is presented of the impact on world oil prices of an exogenous reduction in demand of one million barrels per day (MMBD) which was completed at the request of the Office of Policy and Evaluation (P and E), Department of Energy. A series of three base cases differing are specified with respect to the rate of economic growth and other exogenous variables such as OPEC production. Given these assumptions, the market clearing world oil price is determined. Then for each base case, four different demand reduction paths are assumed and the resulting market clearing world oil price is found. Given the two sets of prices, a price impact is computed which represents the absolute difference between the world oil price in the base case and the specified demand reduction case. Results show that three base cases show price increases beginning in 1982, 1987, and 1990. These differences can principally be attributed to the three different economic growth rate and OPEC production assumptions made for each of these cases. The price impacts of a 1 MMBD demand reduction vary widely over time. For example, an immediate demand reduction in 1979 could result in a high initial impact of approximately $2 per barrel in the 1980's, but would likely decline to an impact of $.50 per barrel, or less, by 1990.

• Research Organization: Department of Energy, Washington, DC (USA). Energy Information Administration
• OSTI ID: 6328515
• Report Number(s): DOE/EIA-0102/15
• Country of Publication: United States
• Language: English

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