OPEC Research Articles

OPEC‐plus proves up to the challenge

<scp>OPEC</scp>‐plus proves up to the challenge

OPEC and non‐OPEC oil sales prices

OPEC and non‐OPEC oil sales prices

О ПЕРСПЕКТИВАХ ИНСТИТУЦИОНАЛИЗАЦИИ ОПЕК+

О ПЕРСПЕКТИВАХ ИНСТИТУЦИОНАЛИЗАЦИИ ОПЕК+

OPEC+ deal and Norway

OPEC+ deal and Norway

Relative efficiency of oil price versus oil output in promoting economic growth: Is OPEC’s strategy right?

A dilemma faced by oil exporting countries is the relative efficiency of the traditional OPEC cartel policy of setting quotas to target a certain crude oil price level versus the policy usually followed by non-OPEC countries of choosing the crude oil output level that maximizes profits, taking the oil price level as given. This paper contributes to the oil and macroeconomics literature by using panel cointegration techniques that consider cross-sectional dependence and structural breaks to study the relative efficiency of these policies to promote economic growth in oil exporting countries.

OPEC: Does it have enough oil?

Oil and Energy TrendsVolume 43, Issue 8 p. 12-20 SURVEY OPEC: Does it have enough oil? First published: 23 August 2018 https://doi.org/10.1111/oet.12612Read the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinkedInRedditWechat Volume43, Issue8August 2018Pages 12-20 RelatedInformation

The Nature of Economic Turbulence: The Power Destructing Economies, with Application to Shipping

Studying the history of “economic turbulence”, we ended up with the certainty that the statistical methods used so far, by economists, are unsuitable to model it. We have mainly the methods of Normal distribution and Random Walk in mind. Moreover, the picture of reality we get from time series depends on the time-frame of the data used… Different time-frame data, different reality… In addition, econometricians provided a whole family of econometric models to approach reality, starting in early 1980s, with “autoregressive models—AR” combined or not with MA (moving averages). But even its 1986 flagship, the GARCH, with its many variations, cannot cope with a number of characteristics, one of which is leptokurtosis (small alpha, higher peaks and long tails), though some argue that it can cater for outliers. Economic turbulence, low or high—despite its characterization by Science as rare—became frequent since 1987 (Black Monday)... In late 1990s e.g. the global financial system underwent 6 crises—which have been called “near turbulences”—over a number of countries, including Russia in 1998. The next turbulence will not be one generation apart—we reckon. This paper is an attempt to invite writers to write a “theory of economic turbulence”. Turbulence is a nightmare, which wakes people up suddenly, and unexpectedly, but it is something people wish to forget… till it strikes again: turbulence stroke in 1929 on (Black) Tuesday, then in 1987 on (Black) Monday and in end-2008, the Great Recession—on 29th September. In Black Monday stock markets around the world crashed losing a huge value in a matter of very short time (Hong Kong, Europe, and USA). The Dow fell ~23%. At that time OPEC collapsed in 1986 and the price of oil doubled… The dry cargo shipping sector entered a turbulent situation since 1989, which has been deteriorated since 2015 reaching finally an alpha equal to ~1.43 < 1.70 by 2035…

OPEC pleased as prices rise and stocks fall, Venezuela suffers and Brazil puts refineries on sale

OPEC pleased as prices rise and stocks fall, Venezuela suffers and Brazil puts refineries on sale

Nigeria and OPEC: evolution of relations

Nigeria and OPEC: evolution of relations

Variation in OPEC and Non-OPEC Crude Oil Production: 1973 to 2010

The impact of the OPEC cartel on crude oil prices is the subject of considerable discussion in the literature but there is little analysis of what crude oil producing nations actually do. Regime shift tests, using U. S. Energy Information Administration monthly crude oil production data from 1973 to 2010, show evidence of structural change in the time series nature of world production. In particular, there is evidence of increased volatility in monthly production over the periods from 1973 to 1990 and from 1997 to 2003. OPEC production volatility differs considerably from non-OPEC production volatility over the period of this study. Indeed, cluster analysis of individual country production identifies variation in clusters over the study period. While there are a number of country production clusters in the period from 1973 to 1990, which appears to drive results for full period analysis as well, the post 1990 period sees a movement toward one large production cluster including both OPEC and non-OPEC nations. It appears the marked dichotomy between OPEC and non-OPEC producers is no longer relevant to modelling world oil and gas production.

OPEC vs US shale: Analyzing the shift to a market-share strategy

In November 2014, OPEC announced a new strategy geared towards improving its market share. Oil-market analysts interpreted this as an attempt to squeeze higher-cost producers, notably US shale oil, out of the market. Over the next year, crude oil prices crashed, with large repercussions for the global economy. We present a simple equilibrium model that explains the fundamental market factors that can rationalize such a “regime switch” by OPEC: (i) the growth of US shale oil production; (ii) the slowdown of global oil demand; (iii) reduced cohesiveness of the OPEC cartel; and (iv) production ramp-ups in other non-OPEC countries; while (v) reductions in US shale costs act against these factors. We show that these qualitative predictions are broadly consistent with oil market developments during 2014–2015. The model is calibrated to oil market data; it predicts accommodation up to 2014 and a market-share strategy thereafter, and explains large oil-price swings as well as realistically high levels of OPEC output.

Can OPEC Cartel Reverse Crude Oil Price Downfall?

This paper employs time varying coefficient approach to assess sensitivity of crude oil price change to a number of factors among which change in OPEC crude production and change in US oil production. Our finding indicate crude oil price is inelastic to OPEC production change, with elasticity varying between 0.09 and 0.13, but elastic to US oil production change with elasticity between 0.99 and 1.05. This imply on average crude oil price is about 8 times more responsive to US supply expansion than to OPEC supply decisions. As a result, OPEC producers have a limited impact on oil price reversal but the withdrawal of the US high cost shale technology producers from crude oil production at low price levels can be more effective driver of oil price rises in the future. Such low level sensitivity of oil price to change in OPEC supply imply, other things remain unchanged, for oil price to rise from the current $45 per barrel to $70 per barrel, OPEC cartel needs to cut its current daily production of 27 million barrels by 8 percent.

Oil Price Versus Oil Output: Is Opec's Strategy Right?

The goal of this paper is to analyze the impact of OPEC’s oil price level versus oil supply strategy on the country’s gross domestic product (GDP) growth rate. Our motivation comes from a fundamental dilemma facing OPEC nations. Its members need to choose between the traditional OPEC cartel policy of setting quotas to target a certain oil price level versus that of choosing the oil output level that maximizes profits of oil producing firms. The main objective of this research is to investigate the relative efficiency of these two policies in promoting long-run economic growth in oil exporting countries. For that purpose, it uses time-varying parameter models in order to account for multiple structural breaks that characterize the crude oil market. This paper contributes to the oil and macroeconomics literature by showing that the impact of crude oil output on oil exporters’ GDP growth is much stronger than that of oil price fluctuations.

OIL: OPEC Negotiations

OIL: OPEC Negotiations

WTO Law and Economics and Restrictive Practices in Energy Trade: The Case of the OPEC Cartel

The World Trade Organization cannot deal comprehensively with restrictive export practices maintained by energy cartels such as the OPEC. The main reason for this is the absence of competition rules in the multilateral trading system. However, in spite of the fact that the WTO does not have rules on competition, it does provide for other rules, such as GATT Article XI on the General Elimination of Quantitative Restrictions. This article will take a law and economics approach and explore whether restrictive practices in the energy sector as maintained by OPEC could be caught by this article. It will analyse whether OPEC’s ‘monopolist market power instrument of choice’, namely the administration of production quota on petroleum, could fall within the definition of this Article. To this end, this contribution aims to understand the economic and legal rationales and functioning of both the WTO and OPEC.

Indonesia and OPEC

Indonesia and OPEC

Partial equilibrium modelling of world crude oil demand, supply and price

Oil production strategies define to a large extent the future of the world crude oil market. This paper aims at modelling the long-term world crude oil supply and demand, as well as the global oil price. The main assumption is that non-OPEC and OPEC oil producers act as price-taker and strategic players respectively. The world crude oil demand is modelled as a linear price dependent function. We compare four scenarios to diagnose the OPEC’s supply behaviour: “cartel”, “oligopoly”, “mixed-cartel” and “mixed-oligopoly”. A Mixed Complementarity Problem, MCP, is used to find the Nash equilibrium point of each game scenario. The OPEC countries maximize their individual total discounted profits in “oligopoly” scenario and their joint profit in “cartel” scenario. In “mixed-cartel” and “mixed-oligopoly” scenarios, OPEC members implement their market power on the quantities allocated to export rather than their total supply. It seems to happen often that OPEC members change their level of collaboration. As the historical statistics of 2012–2015 lie between the model results of “mixed-cartel” and “oligopoly” scenarios, it seems that OPEC’s strategy has been a mixture of the both scenarios and the reason of price collapse in 2015 was that OPEC cartel structure weakened. Model outputs show that oil price will soar again in all scenarios. OPEC’s production strategy can push this price soar back most in the “mixed-oligopoly” scenario to 2026.

Imperfect Cartelization in OPEC

Imperfect Cartelization in OPEC

An Analysis of OPEC's Strategic Actions, US Shale Growth and the 2014 Oil Price Crash

In November 2014, OPEC announced a new strategy geared towards improving its market share. Oil-market analysts interpreted this as an attempt to squeeze higher-cost producers including US shale oil out of the market. Over the next year, crude oil prices crashed, with large repercussions for the global economy. We present a simple equilibrium model that explains the fundamental market factors that can rationalize such a regime switch by OPEC. These include: (i) the growth of US shale oil production; (ii) the slowdown of global oil demand; (iii) reduced cohesiveness of the OPEC cartel; (iv) production ramp-ups in other non-OPEC countries. We show that these qualitative predictions are broadly consistent with oil market developments during 2014-15. The model is calibrated to oil market data; it predicts accommodation up to 2014 and a market-share strategy thereafter, and explains large oil-price swings as well as realistically high levels of OPEC output.

An Analysis of OPEC's Strategic Actions, US Shale Growth and the 2014 Oil Price Crash

In November 2014, OPEC announced a new strategy geared towards improving its market share. Oil-market analysts interpreted this as an attempt to squeeze higher-cost producers including US shale oil out of the market. Over the next year, crude oil prices crashed, with large repercussions for the global economy. We present a simple equilibrium model that explains the fundamental market factors that can rationalize such a regime switch by OPEC. These include: (i) the growth of US shale oil production; (ii) the slowdown of global oil demand; (iii) reduced cohesiveness of the OPEC cartel; (iv) production ramp-ups in other non-OPEC countries. We show that these qualitative predictions are broadly consistent with oil market developments during 2014-15. The model is calibrated to oil market data; it predicts accommodation up to 2014 and a market-share strategy thereafter, and explains large oil-price swings as well as realistically high levels of OPEC output.