Dynamic modelling and testing of OPEC behaviour
Although conventional wisdom suggests that OPEC is a cartel, many studies since 1973 have focused on other underlying forces to explain and forecast OPEC behaviour. Economic theory suggests that natural resource producers should dynamically optimize, and a variety of studies have relied on dynamic o...
| Main Authors: | , |
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| Format: | Working paper |
| Language: | English |
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Oxford Institute for Energy Studies
1990
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| _version_ | 1797097828365893632 |
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| author | Dahl, C Yucel, M |
| author_facet | Dahl, C Yucel, M |
| author_sort | Dahl, C |
| collection | OXFORD |
| description | Although conventional wisdom suggests that OPEC is a cartel, many studies since 1973 have focused on other underlying forces to explain and forecast OPEC behaviour. Economic theory suggests that natural resource producers should dynamically optimize, and a variety of studies have relied on dynamic optimization. Hence, we build a model consistent with dynamic optimization and jointly test dynamic optimization with other hypotheses prevalent in the literature. We use econometric analysis of quarterly data from 1971:l to 1986:4.<br/><br/> We find that individual OPEC countries behave in quite dissimilar ways, suggesting that a cartel hypothesis is not appropriate. Under our specification, there was no evidence of dynamic optimization or a strong target revenue model. Some evidence indicated that Iran, Libya, Saudi Arabia, and the United Arab Emirates (UAE) may include a form of target revenue in their goals. Iraqi behaviour was most consistent with a static competitive market structure. While a static non-competitive market structure was not rejected for Algeria, capacity constraints are more likely to have dictated Algerian policy. A static non-competitive market structure was not rejected for Nigeria, Saudi Arabia, Kuwait, and Venezuela. Given the divergent behaviour of OPEC countries, we conclude that OPEC, rather than being a weak cartel, consists of a non-competitive core of swing producers, each swinging to its own rhythm. |
| first_indexed | 2024-03-07T05:00:51Z |
| format | Working paper |
| id | oxford-uuid:d83c96eb-5c1e-4da0-8581-3ad0d1d3c912 |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-07T05:00:51Z |
| publishDate | 1990 |
| publisher | Oxford Institute for Energy Studies |
| record_format | dspace |
| spelling | oxford-uuid:d83c96eb-5c1e-4da0-8581-3ad0d1d3c9122022-03-27T08:46:49ZDynamic modelling and testing of OPEC behaviourWorking paperhttp://purl.org/coar/resource_type/c_8042uuid:d83c96eb-5c1e-4da0-8581-3ad0d1d3c912EnglishOxford University Research Archive - ValetOxford Institute for Energy Studies1990Dahl, CYucel, MAlthough conventional wisdom suggests that OPEC is a cartel, many studies since 1973 have focused on other underlying forces to explain and forecast OPEC behaviour. Economic theory suggests that natural resource producers should dynamically optimize, and a variety of studies have relied on dynamic optimization. Hence, we build a model consistent with dynamic optimization and jointly test dynamic optimization with other hypotheses prevalent in the literature. We use econometric analysis of quarterly data from 1971:l to 1986:4.<br/><br/> We find that individual OPEC countries behave in quite dissimilar ways, suggesting that a cartel hypothesis is not appropriate. Under our specification, there was no evidence of dynamic optimization or a strong target revenue model. Some evidence indicated that Iran, Libya, Saudi Arabia, and the United Arab Emirates (UAE) may include a form of target revenue in their goals. Iraqi behaviour was most consistent with a static competitive market structure. While a static non-competitive market structure was not rejected for Algeria, capacity constraints are more likely to have dictated Algerian policy. A static non-competitive market structure was not rejected for Nigeria, Saudi Arabia, Kuwait, and Venezuela. Given the divergent behaviour of OPEC countries, we conclude that OPEC, rather than being a weak cartel, consists of a non-competitive core of swing producers, each swinging to its own rhythm. |
| spellingShingle | Dahl, C Yucel, M Dynamic modelling and testing of OPEC behaviour |
| title | Dynamic modelling and testing of OPEC behaviour |
| title_full | Dynamic modelling and testing of OPEC behaviour |
| title_fullStr | Dynamic modelling and testing of OPEC behaviour |
| title_full_unstemmed | Dynamic modelling and testing of OPEC behaviour |
| title_short | Dynamic modelling and testing of OPEC behaviour |
| title_sort | dynamic modelling and testing of opec behaviour |
| work_keys_str_mv | AT dahlc dynamicmodellingandtestingofopecbehaviour AT yucelm dynamicmodellingandtestingofopecbehaviour |