The World Oil Market: An Examination Using Small-Scale Models
AbstractOne must assume that people in one's models do not know what is going to happen, and know that they do not know what is going to happen. --J. R. Hicks, quoted in P. Davidson (1981) This article presents the results of a series of exercises in the use of small-scale models to explain the spot price of crude oil. Small scale modeling-the use of a limited number of equations-involves a number of disadvantages: many interesting questions will have to be ignored and often a sense of realism may be sacrificed. However, small-scale models are an essential part of economic research. Compared to large, multi-equation models, small-scale models are often transparent-causal relations are clearly visible. In addition, small-scale models can often be easily updated and reexamined in the light of new information or assumptions. This is particularly important in policy-making when time and clear communication are at a premium.
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Bibliographic InfoArticle provided by International Association for Energy Economics in its journal The Energy Journal.
Volume (Year): Volume 9 (1988)
Issue (Month): Number 3 ()
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- Reynolds, Douglas B. & Pippenger, Michael K., 2010. "OPEC and Venezuelan oil production: Evidence against a cartel hypothesis," Energy Policy, Elsevier, vol. 38(10), pages 6045-6055, October.
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- Bharati, Rakesh & Crain, Susan J. & Kaminski, Vincent, 2012. "Clustering in crude oil prices and the target pricing zone hypothesis," Energy Economics, Elsevier, vol. 34(4), pages 1115-1123.
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