energy disruptions interfirm price effects and the aggregate economy in an economy with many imperfect competitors monopolistic competition firms that pass through higher oil prices during a disruption will affect the demand for firms in other industries firms that charge higher prices for their final product will include the effect on their own final product in their private decisions but will exclude the effect on the final products of other firms although a pecuniary externality these actions will reduce society s welfare unlike the case of a perfectly competitive market this situation creates a societal risk that is much wider than an externality in any single market policy interest shifts from one of punishing persian gulf oil producers to one of cushioning an industrialized economy from sudden disruptions caused by political and military conflicts although the value of reducing oil use depends upon a number of unknown parameters with wide distributions a representative numerical example suggests that it may approach 5 per barrel

oil price volatility and stock price fluctuations in an emerging market evidence from south korea abstract how important are oil price fluctuations and oil price volatility on equity market performance what are the policy implications if volatility turns out to be significant we assess this issue in an economics finance nexus for korea using a vec model including interest rates economic activity real stock returns real oil prices and oil price volatility our main aim is to capture the effects of crude oil prices on the korean economy thoroughly covering the period of the asian financial crisis of 1997 which heavily affected the country and the oil price hikes in the early 1990s after the gulf war south korea was the country most hit by the financial crisis together with indonesia and thailand results indicate the dominance of oil price volatility on real stock returns and emphasize how this has increased over time oil price volatility can have profound effect on the time horizon of investment and firms need adjust their risk management procedures accordingly this increase in dependency has been found in other net oil importing emerging equity markets we test the relationship between oil price movements and economic activity by using modern time series techniques in a cointegrating framework we expand the standard error correction model by examining the dynamics of out of sample causality through the generalized variance decomposition and impulse response function techniques the evidence from persistence profiles also gives important guidelines based on how fast the entire system adjusts back to equilibrium in addition we find the cointegrating relationship to be stable and find that the linear error correction model to be more favorable than an asymmetric 2 period markov switching model

sharing the burden for climate change mitigation in the canadian federation dividing the burden for greenhouse gas abatement amongst the provinces has proven challenging in canada and is a major factor contributing to canada s poor historic performance on greenhouse gas abatement as the country aims to achieve substantial cuts to emissions over the next decade and by mid century such burden sharing considerations are likely to be elevated in importance this paper uses a calibrated multi region multi sector computable general equilibrium model to compare a number of archetypal rules for sharing the burden of a joint commitment amongst members for the case of greenhouse gas reductions in canada because of the substantial heterogeneity amongst canadian provinces these different burden sharing rules imply signifcantly different relative abatement effort amongst provinces and also signifcantly different welfare implications when emission permits are allocated on an equal per capita basis welfare is increased in ontario british columbia quebec and manitoba and signifcantly reduced in alberta and saskatchewan in contrast when emission permits are allocated based on historic emissions alberta and saskatchewan are made better off and ontario british columbia quebec and manitoba are made worse off we compare these archetypal burden sharing rules to existing provincial emission reduction commitments and find that none of the standard burden sharing rules comes close to existing commitments we argue that the debate on burden sharing of greenhouse gas abatement in canada could be objectified if informed by coherent quantitative analysis such as the one presented here

opec and the international oil market can a cartel fuel the engine of economic development abstract the opec cartel was formed to promote two economic goals one microeconomic low oil market volatility the other macroeconomic promotes economic development of its members these goals create a tension since the cartel s single tool is output quotas using this dual micro macro perspective we analyze oil exporting countries behavior we find that the effects of the cartel s choices will be reflected in oil market stability long term macroeconomic development and international oil market structure if an oil producing country cares about both oil industry profits and macroeconomic stability the goal of output stability may be inconsistent with cartel membership

market design the policy uses of theory the use of modern microeconomics in policy is illustrated by the markets for spectrum electricity greenhouse gas reductions defense procurement and treasury bills further examples are antitrust divestiture rules market based redistribution fishery conservation and privatization the limits of the use of theory are also discussed by reference to china s economy wide reforms lessons on the policy use of theory are drawn

limit pricing and the in effectiveness of the carbon tax we present a theory of limit pricing monopoly in non renewable resource production facing a very inelastic demand an oil monopoly seeks to induce the highest price that does not destroy its demand unlike the conventional hotellian analysis the monopoly tolerates some ordinary substitutes to its oil but deters high potential ones with limit pricing policy induced extraction changes do not obey the usual logic for example oil taxes have no effect on current oil production extraction increases when high potential substitutes are promoted but can be effectively reduced by supporting ordinary substitutes the carbon tax not only applies to oil it also penalizes its ordinary carbon substitutes whose market shares are taken over by the monopoly thus the carbon tax ambiguously affects current and long term oil production and carbon emissions

the outlook for us oil dependence abstract oil dependence is defined as a dynamic problem of short and long run market power the potential monopoly power of an oil cartel depends on its market share and the elasticities of oil supply and demand while the economic vulnerability of oil consuming states depends most directly on the quantity of oil imported and the oil cost share of gross domestic product gdp of these factors only the market share of the organization of petroleum exporting countries opec cartel and the rate of growth of world oil demand are clearly different than they were 25 years ago opec still holds the majority of world oil and in the future will regain market share a hypothetical 2 year supply reduction in 2005 2006 similar in size to those of 1973 1974 or 1979 1980 illustrates the potential benefits to opec and harm to the us economy of a future oil price shock opec s revenues are estimated to increase by roughly 0 7 trillion while the us economy loses about 0 5 trillion strategic petroleum reserves seem ineffective against a determined multi year supply curtailment increasing the market s price responsiveness by improving the technologies of oil supply and oil demand can greatly reduce the costs of oil dependence each element of this interpretation of the oil dependence problem is well supported by previous studies this paper s contribution is to unite these elements into a coherent explanation and to point out the enormously important implications for energy policy

dynamic demand and optimal opec pricing an empirical investigation abstract the demand for energy and in particular the demand for oil is very sluggish given this dynamic description of demand a monopoly or a dominant cartel may either apply a volatile or a stable price policy in order to maximize profits in particular earlier works of fromholzer and wirl derive that the shape of the equilibrium demand function determines whether a price is stable or volatile more precisely a concave demand relation induces a smooth and a convex relation leads to a volatile strategy this theory is empirically tested for the demand for opec oil

iranian oil free zone and international oil prices abstract one of the main elements of economic sanctions against iran due to its nuclear and military programs is crude oil exportation restrictions in addition to investment in iranian energy related projects senders of such sanction are interested in understanding the impacts of such embargos on international oil prices we apply unrestricted vector autoregressive var model using impulse response functions irf and variance decomposition analysis vda tools with annual data from 1965 to 2012 to analyze the dynamic response of international oil prices to iranian oil export sanction controlling for the supply of non iranian oil the world gdp per capita and post islamic revolution exogenous dummy variables we show that international oil prices respond negatively and statistically significant to increasing shock in absolute negative changes of the iranian oil exports our proxy of iran oil sanctions following the first 2 years after shock the main reason is the positive response of the non iranian oil supply to negative shocks in iranian oil exports filling the missing supply of iranian oil in international markets

oil development operating cost estimates 1955 1985 abstract few if any published oil production cost estimates can be verified as to method and basic data using us drilling costs and some assumptions explained in the text this paper estimates development operating costs in 41 oil producing nations from 1955 to 1985 from publicly available data on drilling estimation methods are described in detail so that anyone with access to better information on any item can substitute it to arrive at a better estimate

oil and the macroeconomy since world war ii all but one of the u s recessions since world war ii have been preceded typically with a lag of around three fourths of a year by a dramatic increase in the price of crude petroleum this does not mean that oil shocks caused these recessions evidence is presented however that even over the period 1948 72 this correlation is statistically significant and nonspurious supporting the proposition that oil shocks were a contributing factor in at least some of the u s recessions prior to 1972 by extension energy price increases may account for much of post opec macroeconomic performance

an empirical analysis of the dynamic programming model of stockpile acquisition strategies for china s strategic petroleum reserve abstract the world s future oil price is affected by many factors the challenge therefore is how to select optimal stockpile acquisition strategies to minimize the cost of maintaining a reserve this paper provides a new method for analyzing this problem using an uncertain dynamic programming model to analyze stockpile acquisition strategies for strategic petroleum reserve using this model we quantify the impact of uncertain world oil price on optimal stockpile acquisition strategies of china s strategic petroleum reserve for the period 2007 2010 and 2011 2020 our results show that the future stockpile acquisition is related to oil prices and their probability and if not considering the occurrence of oil supply shortage china should at least purchase 25 million barrels when world oil price is at an optimal level the optimal price of stockpile acquisition of every year has a stronger relationship with the probability of high price and the optimal expected price and size of stockpile acquisition is different in each year

the development of the neoclassical tradition in labor economics this essay on labor economics examines neoclassical theory s rise to ascendancy following the second world war with a secondary focus on the relative decline but continued influence of institutionalist economic theory the authors describe the evolution of institutional and neoclassical theory from the late nineteenth to mid twentieth centuries examine some early intellectual debates between the two camps briefly describe the work of neoclassical labor economics pioneers and look at major developments over the past 30 years they argue that neoclassical economists increasing intellectual breadth and influence in public policy have led them to pay closer attention to issues that have long been of concern to institutionalists and neoinstitutionalists

empirical analysis of optimal strategic petroleum reserve in china abstract the chinese government began to prepare for the establishment of strategic petroleum reserve in march 2004 therefore answering the question of what level of strategic petroleum reserve would be suitable for china s future economic development becomes essential using a decision tree model based on a cost function this paper quantifies china s optimal strategic petroleum reserve for the period 2005 2020 this approach provides a methodology reference for further quantified discussion on china s spr our results show that for economic development and security of the energy supply the strategic petroleum reserve should be the equivalent of 30 60 days of net oil import for an optimal solution when the oil price is 50 bbl with a reserve of an equivalent of 60 90 days of net oil import to have an optimal solution when oil price is 20 35 bbl

modeling opec behavior economic and political alternatives the predominant approach to modeling opec behavior depends upon the assumption that economic self interest provides the best predictor of the cartel s price and production strategy with rational monopoly behavior the exogenous characteristics of the oil market determine an optimal price path for the group but opec members have diverse economic as well as political goals and uncertainty about oil market responses provides substantial leeway to argue about what is optimal an examination of the five key opec price decisions since 1973 shows that an operational code of advancing political priorities on arab israeli issues while deflecting security challenges better explains saudi arabia s decision making than the economic optimizing approach moreover no economic formula alone is consistent with saudi behavior the balance of internal and external forces of a political or security character on saudi leadership suggests more of a tilt toward price hawkishness than pure considerations of economic self interest would indicate this tilt is reinforced by a systematic weakness on the part of the u s government to exercise a sustained countervailing influence on the kingdom on behalf of moderation

measuring energy security can the united states achieve oil independence stochastic simulation of the direct economic costs of oil dependence in an uncertain future is proposed as a useful metric of oil dependence the market failure from which these costs arise is imperfect competition in the world oil market chiefly as a consequence of the use of market power by the organization of the petroleum exporting countries opec cartel oil dependence costs can be substantial it is estimated that oil dependence costs to the us economy in 2008 will exceed 500 billion other costs such as military expenditures or foreign policy constraints are deemed to be largely derivative of the actual or potential economic costs of oil dependence the use of quantifiable economic costs as a security metric leads to a measurable definition of oil independence or oil security which can be used to test the ability of specific policies to achieve oil independence in an uncertain future

a national micro data based model of residential electricity demand new evidence on seasonal variation building on earlier estimates of electricity demand the author estimates elasticities by month to determine differences between heating and cooling seasons he develops a three equation model of residential electricity demand that includes all the main components of economic theory the model generates seasonal elasticity estimates that generally support economic theory based on the model using a national current household data set monthly division the evidence indicates there is a seasonal pattern for price elasticity of demand while less pronounced there also appears to be seasonal patterns for cross price elasticity of alternative fuels for the elasticity of appliance stock index and for an intensity of use variable

a dynamic programming model of china s strategic petroleum reserve general strategy and the effect of emergencies abstract to protect the security of energy supply china is building national strategic petroleum reserve spr we present a dynamic programming model to determine the optimal stockpiling and drawdown strategies for china s spr under various scenarios focusing on minimizing the total cost of reserves in contrast to previous research the oil price given in our model is exogenous on a monthly instead of annual basis with a view to more realistic simulation of optimal strategies each year our model results show that in the case where stockpiling affects oil prices a given spr size will be achieved earlier than when stockpiling does not affect oil prices in different emergency conditions the optimal stockpiling and drawdown strategies of china s spr are very different when an emergency occurs the shock of stockpiling on the oil price per barrel could range 0 49 6 35 while the impact of drawdown on the oil price per barrel could range 6 22 to 0 48

the empirical role of the exchange rate on the crude oil price formation this paper adopts a novel empirical approach to the crude oil price formation for the purpose of understanding the price reactions of opec member countries to changes in the exchange rate of the us dollar against other major currencies and prices of other members the results are broadly consistent with the view of the absence of a unified opec determined price in the international crude market literature in addition the results also highlight a cross regional dimension of the crude oil market

the price of oil lower and upper bounds abstract the magnitude of the recent dramatic fall in oil prices has once again like the rises of 1973 and 1979 taken most energy analysts and oil industry participants by suprise creating even greater uncertainty about future developments in the oil market in this paper we suggest that a return to first principles is appropriate at this time in order to help clarify the outlook two simple hotelling type models of the oil market are described one of the perfectly competitive market the other of a purely monopolistic market these two models are used to derive lower and upper bounds on oil prices a reinterpretation of the history of the oil market over the last 25 years is suggested with some implications for the future course of oil prices

does opec still exist as a cartel an empirical investigation the aim of this paper is to determine if opec acts as a cartel by testing whether the production decisions of the different countries are coordinated and if they have an influence on oil prices relying on cointegration and causality tests in both time series and panel settings our findings show that the opec influence has evolved through time following the changes in the oil pricing system while the influence of opec is found to be important just after the counter oil shock our results show that opec is a price taker on the majority of the considered sub periods finally by dividing opec between savers and spenders we show that it acts as a cartel mainly with a subgroup of its members

u s oil dependence 2014 is energy independence in sight abstract the importance of reducing u s oil dependence may have changed in light of developments in the world oil market over the past two decades since 2005 increased domestic production and decreased oil use have cut u s import dependence in half the direct costs of oil dependence to the u s economy are estimated under four u s energy information administration scenarios to 2040 the key premises of the analysis are that the primary oil market failure is the use of market power by opec and that u s economic vulnerability is a result of the quantity of oil consumed the lack of readily available economical substitutes and the quantity of oil imported monte carlo simulations of future oil market conditions indicate that the costs of u s oil dependence are likely to increase in constant dollars but decrease relative to u s gross domestic product unless oil resources are larger than estimated by the u s energy information administration reducing oil dependence therefore remains a valuable goal for u s energy policy and an important co benefit of mitigating greenhouse gas emissions

does a target capacity utilization rule fulfill opec s economic objectives abstract this paper uses the us energy information administration s oil market simulation model to evaluate the ability of a target capacity rule to satisfy opec s economic objectives we show that when demand and supply lags exist opec s optimal price path may consist of periods of low prices followed by a one or two period price shock the tcu rule does not display periodic price shocks and thus generates less discounted revenue over the planning period the tcu rule comes closest to the optimum either when there are no lags or when opec optimizes subject to a minimum revenue constraint

this is what happened to the oil price macroeconomy relationship reply abstract james hamilton argues that oil price changes are still important for the macroeconomy and that using a filter which screens out drops and measures increases relative to a reference level wellrepresents the effects of price changes when they are choppy while this measure outperforms the oil price transformations considered in my paper much of its predictive power is coming from the pre 1986 and pre 1973 part of the sample with less than 10 years of choppy data finding the best oil price transformation will likely require analysis with cross sectional components ruling out effects from oil price decreases is also probably counterproductive to uncovering structure

energy security externalities and policies abstract in this paper we review conceptual arguments and empirical evidence related to two potential sources of market failure involving energy security in doing so we consider several questions involving the distinction between externality and market inefficiency and the distinction between market failures that are amenable or not amenable to correction given our current understanding of the workings of an economy several conclusions follow from our analysis regarding the potential sources of market failure and possible remedies the problem of excess wealth transfer from exporter market power may be an issue but current knowledge of oil market behaviour is too weak to support a strong conclusion other supposed costs of oil import dependence also are not well grounded including externalities related to the vulnerability of the economy to energy price shocks

a note on opec market power and oil prices a static model of opec as a cartel with a fringe group of competitive producers is used to define short and long run monopoly price curves as a function of opec s market share a static model is used on the grounds that oil as adelman has argued is not a depletable resource in the sense of the hotelling theory but is more like a normal good that can be produced with application of labour capital resources and technology a rational cartel will choose prices that lie between the two curves the shapes of the curves depend on the world price elasticity of demand for oil and on the supply response rate of competitive oil producers as opec s market share increases the distances between the two curves increase rapidly this could lead to an unstable market since any price between the two curves would be obtainable in the short run in the long run prices above the long run price curve will result in a loss of market share for the cartel except in a growing market reducing the cartel s market power future work will extend the model to consider dynamic pricing strategies as a function of the cartel s discount rate and world market response rate

in pursuit of monopoly power recent quantitative work in industrial economics this paper reviews empirical work in industrial organization devoted to the question of inferring the existence of monopoly power from data on observed market outcomes like profits and prices the discussion covers inter industry work long conventional in the area newer developments in intra industry analysis and case studies and concludes with some remarks on a small but growing body of work assessing market dynamics the wide range of studies reviewed all generally reveal that market power exists in many industries

opec and cheating revisiting the kinked demand curve abstract given a formal or tacit group agreement by an oligopoly such as opec it is still necessary to understand what pricing and output decisions individual members actually make the well known kinked demand curve model of oligopoly behaviour is useful in this regarg the model is usually applied to a price and market share fixing oligopoly in a deterministic world with appropriate modifications it can be applied to opec as a price fixing cartel with varying degrees of cohesion from 1973 1986 and as a quantity fixing cartel since 1986 operating in an uncertain world

can opec cause inflation and recession abstract this paper addresses an issue that has been the subject of debate in the media and in academic circles the issue concerns the effect of higher oil prices initiated by opec on economic activity in oecd countries results of cointegration tests indicate that there is no long run relationship between oil prices and macroeconomic variables in oecd countries however causality testing indicates the existence of unidirectional causality from oil prices to domestic prices and output

what happened to the oil price macroeconomy relationship abstract strong evidence is found that oil prices no longer granger cause many u s macroeconomic indicator variables in data after 1973 a number of potential explanations are explored that sample stability issues are responsible that oil prices are now endogenous and that linear and symmetric specifications misrepresent the form of the oil price interaction none of these hypotheses are supported by the data the opec price increases do appear to have had significant impacts while the effects of the price declines of the 1980s are smaller and harder to characterize these results have potentially important implications for the large body of research which utilizes oil prices as an instrumental or explanatory variable

opec and the u s oil import tariff open loop nash extraction plans of exhaustible resource producers in which producers take the plans of others as given are time consistent but proposed open loop oil import tariffs are almost always time inconsistent the paper derives a time consistent open loop nash tariff that can be readily computed for both competitive and a nash cournot specification of the oil market the authors illustrate the time sequence of the optimal import tariff for a simple model of the united states facing a duopolistic version of opec and a comparative fringe of oil producers and compare the outcome with the competitive equilibrium copyright 1991 by royal economic society

opec behavior a test of alternative hypotheses since interpretations of past and future oil price patterns depends on the model chosen the author tests and compares alternative theories of opec as a first step in validating the choice on any one model the results show that among opec countries the partial market sharing cartel model is the only model not rejected by at least some of the 11 members and gives the best explanation of production in comparison with 11 non opec countries the competitive model could not be rejected for 10 of the 11 non opec producers this raises the question of why if opec is a cartel friedman s predictions have not come true and introduces new questions for future research 19 references 3 tables

this is what happened to the oil price macroeconomy relationship abstract many of the quarterly oil price increases observed since 1985 are corrections to even bigger oil price decreases the previous quarter when one looks at the net increase in oil prices over the year recent data are consistent with the historical correlation between oil shocks and recessions

residential demand for fuelwood this is the first national microbased study of residential demand for wood as fuel the data are from the us department of energy residential energy consumption survey the model employs a somewhat unique interaction dummy for price that allows the simultaneity problem to be adjusted for in a 2sls format and then the interaction term to be calculated and entered in the second stage results are compared with elasticity estimates derived from the same data set for the four other main residential fuels wood has a price elasticity of 0 421 for main users

clustering in crude oil prices and the target pricing zone hypothesis abstract this paper studies the target pricing zone tpz hypothesis for crude oil by examining price clustering in the dollar digit it is hypothesized that price clustering occurs within an established tpz if opec is able to defend the upper and lower bounds through output changes the results show that prices strongly cluster around the dollar digit value of 9 within the tpz sub periods but not outside the sub periods furthermore the degree of clustering declines when production capacity utilization is high and when production significantly exceeds quotas consistent with opec s inability to defend the zone nine centered clustering also results in lower contemporaneous and next day volatility these results support the target pricing zone hypothesis of crude oil

on the economic determinants of oil production theoretical analysis and empirical evidence for small exporting countries abstract in this paper decisions regarding production in oil exporting countries are studied by means of theoretical analysis and empirical investigation in particular we aim at describing the relationship between oil production levels and changes in the world oil demand and prices intertemporal production decisions by a representative oil producer are modeled by means of a partial equilibrium model in this theoretical model oil producers are subject to exogenous shocks in world oil consumption and prices oil companies can change output levels only by incurring a fixed cost results from the simulation of this model show a strong relationship between oil production and changes in world oil consumption on the contrary the effects of changes in real oil prices on oil production decisions seem to be much lower results from the simulation of the theoretical model are then empirically investigated using time series econometric techniques the empirical evidence supports the hypothesis that oil producing countries are characterized by different responses to changes in world oil demand and in real oil prices for many countries production rapidly adjusts to changes in consumption whereas responses of oil production to innovations in real oil prices are found to be not statistically significant in addition when non linearities in the relationship between world oil demand prices and output levels are allowed for evidence of asymmetric effects of shocks to exogenous variables on output levels is found for some countries

aggregate production planning for process industries under oligopolistic competition abstract we consider a competitive version of the traditional aggregate production planning model with capacity constraints in the general case multiple products are produced by a few competing producers oligopoly with limited capacities production quantities prices and consequently profits depend on production and allocation decisions of each producer in addition there is competition for the raw material whose supplies are limited and where prices reflect these limitations such situations have recently occurred in several process industry settings including petro refining petrochemicals basic chemicals cement fertilizers pharmaceuticals rubber paper food processing and metals we use a successive bertrand cournot framework to address this problem and to determine optimal production quantities prices and profits at the producers and at the raw material supplier our analysis allows a new way to understand and evaluate the marginal value of additional capacity when there is competition for the market and raw materials

are biofuels the culprit opec food and fuel the food commodity price boom of 2003 2008 was the most notable in the past several decades having a substantial impact on global economic activity it affected developing nations by impacting real output the balance of payments government budgetary positions and most important the well being of the very poor high commodity prices also affected developed countries by transmitting business cycle disturbances and creating inflationary pressures several recent studies tried to identify and quantify the factors that caused the food commodity price boom of 2003 2008 see for instance isabel vansteenkiste 2009 these studies suggest that one key factor is growth in demand which since the 1980s has outpaced growth in supply other studies argued that biofuel is the culprit since it increases demand for staple crops see for instance donald mitchell 2008 all these studies however assumed competitive markets and did not consider the impact of biofuel on energy costs to farmers moreover they ignored the organization of petroleum exporting countries opec these studies leave us perplexed regarding the true impact of biofuel on food commodity prices was it or was it not an important contributor to the recent food commodity boom we believe that to answer this question the interactions between energy and food must be modeled and opec introduced and the impact of biofuels compared with other factors that are argued by the literature to be important this paper aims to analyze the multiple contributions of energy and biofuels to the increase are biofuels the culprit opec food and fuel

investment and operating choice oil and natural gas futures prices and drilling activity abstract we present evidence that changes in oil and natural gas field investment measured by drilling rig use respond positively to changes in the futures prices of oil and natural gas consistent with predictions based upon value maximizing behavior these results hold for world regions dominated by private independent oil companies but not national oil companies in those cases where futures price changes are identified as drivers the role of spot prices is either absent or weak the results are robust to several alternative specifications including controls for changes in rig productivity

determinants of opec production implications for opec behavior we estimate models that identify the economic and organizational determinants of crude oil production by individual opec nations to clarify the interpretation of econometric results we model production with specifications that resolve the statistical ordering of variables and estimate models with techniques that can cope with stochastic trends in the time series we also analyze the short run dynamics for asymmetries that may carry important insights about opec behavior results indicate that quotas are an important determinant of production and their effects generally are symmetric which implies that opec is an organization that influences production and ultimately prices real prices generally have a positive effect on production and the size of this effect may depend on spare capacity which implies that opec behaviors also embody competitive elements finally all nations other than saudi arabia show some form of production sharing behavior which may imply that opec shares mismatches between the call for opec production and opec quotas

economists as public policy advisers as a member of the joint economic committee for over 15 years i have had ample occasion to observe economists testifying when i was chairman of the committee in the last congress for example we held over 100 hearings and heard from at least that many different economists from this experience i have developed some views about how economists can be effective witnesses and more generally how they can make a useful contribution to economic policy for me the most important quality for economists to have when they are testifying or advising policymakers is the ability to express their ideas on important policy issues clearly and simply without jargon there is an art to telling policymakers what they need to know but don t want to hear an economist who wants to contribute to the policy making process needs to be a good salesman but not a snake oil salesman i encourage more economists to take an active interest in public policy and to contribute to the debate on the economic issues

oil price fluctuation volatility spillover and the ghanaian equity market implication for portfolio management and hedging effectiveness abstract this study attempts to contribute to the literature on stock markets and energy prices by examining the dynamic volatility and volatility transmission between oil and ghanaian stock market returns in a multivariate setting using the recently developed var garch var agarch and dcc garch frameworks in turn the models results are used to compute and analyze the optimal weights and hedge ratios for oil stock portfolio holdings for comparison purposes and to put the paper more in the perspective of west africa the nigerian stock market is also included in the analysis our findings point to the existence of significant volatility spillover and interdependence between oil and the two stock market returns while spillover effects are stronger for nigeria the transmission of volatility is much more apparent from oil to stock than from stock to oil in the case of ghana also the study demonstrates evidence of short term predictability in oil and stock price changes through time and reveals that conditional volatility changes more rapidly as result of substantial effects of past volatility rather than past news shocks for all market returns moreover we show that there is a slightly more effective hedge in the two stock markets under the dcc garch framework our preferred model compared to the other two models although hedging effectiveness is much greater for ghana on the whole our findings for optimal hedge ratios are consistent with other studies and particularly the view that oil assets should be an integral part of a diversified portfolio of stocks and suggest that a better understanding of volatility links is crucial for portfolio management in the presence of oil price risk finally the existence of multivariate asymmetric effects and dynamic conditional correlations as revealed by the var agarch and dcc garch models make it clear that the assumptions of symmetric effects and constant conditional correlations are not supported empirically

opec and other commodity cartels a comparison abstract the economic literature provides specific characteristics for cartels although the theory of international cartels is not well developed in the literature and every cartel is unique some of these characteristics exist in each cartel this study investigates the existence of these characteristics in six known commodity cartels including opec in addition it compares the oil companies cartel the seven sisters to opec and summarizes the findings of opec econometric models developed in the literature in the last 25 years and concludes that the results do not support cartel or competitive models for opec although other cartels are more successful than opec many books and articles in economics use opec as a cartel example neither statistical tests nor theory support the popular use of opec as a cartel example indeed this article concludes that opec is composed of saudi arabia the dominant world producer plus several distinct sub groups and that separate models are required to explain the behavior of each assigning the power of some opec members to opec has caused confusion about its behavior recent opec success is attributed to political natural and technical capacity limitations in the oil fields that prevented countries from cheating on their quota in other words opec adherence to the quota except for saudi arabia is anything but voluntary

estimation of user s cost for a depletable resource such as oil abstract this paper presents an attempt to derive an empirically tractable definition of the user s cost for a depletable resource such as oil it is shown that in an intertemporal optimization framework the user s cost can be measured by the marginal replacement cost mrc of the resource defined as the cost of adding one unit to the stock of the resource this definition is applied to data for the middle east based on an econometric analysis of the proven reserves production process the user s cost is estimated for that area for the period 1960 76 the empirical results show that the user s cost is but a small fraction of the market price of crude oil for the period under consideration

the equilibrium price range of oil economics politics and uncertainty in the formation of oil prices abstract this paper attempts to clarify the articulation between economic and political factors in the formation of petroleum prices it begins with defining the political factors then it gives a definition of the dynamic equilibrium price of a mineral commodity market the essential point is that when actors control significant low cost reserves and will not or cannot adopt behaviour of a substantial economic rationality then the economic analysis does not allow a unique dynamic equilibrium price to be determined however it does permit definition of an equilibrium price range within which political preferences may be expressed finally the paper draws some conclusions on what could be discussed within the scope of a new oil producer consumer dialogue

will disruptions in opec oil supply have permanent impact on the global oil market abstract opec has long been a major stakeholder and strong player in the global energy market especially in the petroleum sub sector in recent time however there have been questions over the influence of opec in the sub sector due to changing petroleum production landscape specifically as a result of the discovery of unconventional energy resources in north america and emergence of non opec petroleum producing and exporting countries this development could have significant effect on the global energy market and the macro economy of opec member countries the stationarity or otherwise of opec oil production supply has important implications for determining whether fluctuations in opec market supply has temporary or permanent effect using the zivot andrews structural break stationarity test and production data of opec member countries from 1980 to 2011 this paper investigates whether fluctuations in opec market supply has temporary or permanent effect the empirical analysis shows that for only 5 opec members nigeria saudi arabia ecuador kuwait and uae is the hypothesis of unit root rejected this implies that for the five 5 opec members the effects of shocks to oil production are not permanent and future pattern of oil production can be predicted following past trend the practical implication of this finding is that opec production quota strategy may not have long term impact on the global oil market thus the cartel needs to improve oil production policy coordination among members and ensure strict adherence to production quota while also stressing the need for diversification in member countries

residential demand for liquid petroleum gas abstract this is the first micro based study of residential demand for liquid petroleum gas lpg the data are from doe s residential energy consumption survey results are compared with elasticity estimates derived from the same data set for the three other main residential fuels lpg has a price elasticity for space and water heating combined of 1 3 income elasticity is 0 207

security independence and sustainability imprecise language and the manipulation of energy policy in the united states abstract this article examines the impact of imprecise terminology on the energy policymaking process in us focusing on the manipulation of discourse by different political economic interests seeking to sway popular opinion using the 2012 us presidential elections as a backdrop the analysis highlights the cooption of the concepts security independence and sustainability in energy debates by different and often opposing interest groups the article s first section traces the malleability of energy terminology to the vagueness of the term energy itself and notes how qualifying words like security independence and sustainability have been selectively exploited to introduce further ambiguity to an already fungible concept the second section notes that while energy is a critical and complex factor of macroeconomic production its main public visibility comes via a few partially representative numbers like gasoline prices this mismatch of broad social importance and piecemeal public understanding enables organized interests to leverage vague terminology in support of particular policy ideas the third section examines three policymaking tools 1 taxation 2 regulation and 3 technology promotion and compares these administrative instruments ultimately the article concludes that loosely defined terminology inhibits energy policy discussion and stifles meaningful public debate over and action on energy issues