World price of oil: a medium-term analysis

Book · Thu Jan 01 04:00:00 EST 1976

OSTI ID:7113310

Houthakker, H S

The price of oil is central to the determination of most other energy prices. This discussion focuses on the level and pattern of prices in the world petroleum market. The emphasis is not only on the medium-term outlook (until the early 1980s) but also on what the consuming countries can realistically do about it. A verbal description of a quantitative model of the world petroleum market is given, involving supply and demand factors, refining, and transportation aspects. The analysis leads to the following conclusions. First, projections of patterns of petroleum trade are sensitive to the assumptions made about the price elasticity of supply and demand. Two sets of elasticity assumptions were used to suggest a range of possible outcome. Second, even under optimistic elasticity assumptions, the real price of oil is likely to be higher in 1980 and 1985 than it is now unless the consuming countries take appropriate countermeasures. Third, OPEC is not likely to adopt an export tax rate that will maximize its revenues because at such a rate its output would be too small to preserve cohesion among the cartel members. Therefore, consumers' countermeasures should aim at reducing OPEC output to a level at which cartel cohesion becomes a problem. Fourth, the most promising countermeasure is a common import tax levied by the member countries of the International Energy Agency. To prevent further OPEC price increases, this tax should probably be about $3.25 per barrel. Finally, such a tax would have a favorable effect on the balance of payments of the oil importers because, at a given level of output, it would essentially be paid by producers. (MCW)

• OSTI ID: 7113310
• Country of Publication: United States
• Language: English

Related Subjects

02 PETROLEUM
020700 -- Petroleum-- Economics
Industrial
& Business Aspects
29 ENERGY PLANNING, POLICY, AND ECONOMY
290200 -- Energy Planning & Policy-- Economics & Sociology
294002* -- Energy Planning & Policy-- Petroleum
CHARGES
CONSUMPTION RATES
DEMAND FACTORS
ECONOMIC ELASTICITY
ENERGY MODELS
FORECASTING
GLOBAL ASPECTS
IMPLEMENTATION
INCOME
INTERNATIONAL ENERGY AGENCY
INTERNATIONAL ORGANIZATIONS
MARKET
OPEC
PETROLEUM REFINERIES
SIMULATION
TAXES
TRADE