Abstract
Using a model of the world energy mark at that incorporates price expectation and lagged adjustment of demand and supply, we examine the implications of various price-paths that could be selected by OPEC. After demons trating the sensitiyity of the results to change in vunetional spectifications and certain parameter values, we discuss a variety of rule-of-thurob pricing stragegics under which OPEC sets prices in response to available market singals. A strategy that is relatively caustious about further major price increases servces OPEC relatively well in comparison with other strategies, but there exists a real possibility of major, abrupt price increases within the next ten years.
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