On the Economic Determinants of Oil Production. Theoretical Analysis and Empirical Evidence for Small Exporting Countries
AbstractIn this paper, decisions regarding production in oil exporting countries are studied by means of theoretical analysis and empirical investigation. Under the assumptions of exogenous oil prices and world oil demand, we are able to describe the relationship between oil production levels and changes in the conditions in world oil markets. Intertemporal production decisions by a representative oil producer are modelled by means of a partial equilibrium model. In this theoretical model, oil producers are subject to exogenous shocks in world oil demand 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 several 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 exogenous variables and output levels are allowed for, evidence of asymmetric effects of output levels to shocks in demand levels and oil prices is found.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2011.54.
Date of creation: Jul 2011
Date of revision:
Oil Production; Exogenous Shocks; Theoretical Modelling; Time Series Analysis;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
- Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-08-02 (All new papers)
- NEP-CWA-2011-08-02 (Central & Western Asia)
- NEP-ENE-2011-08-02 (Energy Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- M. Galeotti & A. Lanza & M. Manera, 2001.
"Rockets and feathers revisited: an international comparison on European gasoline markets,"
Working Paper CRENoS
200112, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
- Galeotti, Marzio & Lanza, Alessandro & Manera, Matteo, 2003. "Rockets and feathers revisited: an international comparison on European gasoline markets," Energy Economics, Elsevier, vol. 25(2), pages 175-190, March.
- De Santis, Roberto A., 2003.
"Crude oil price fluctuations and Saudi Arabia's behaviour,"
Elsevier, vol. 25(2), pages 155-173, March.
- Roberto A. De Santis, 2000. "Crude Oil Price Fluctuations and Saudi Arabian Behaviour," Kiel Working Papers 1014, Kiel Institute for the World Economy.
- Kaufmann, Robert K., 1991. "Oil production in the lower 48 states : Reconciling curve fitting and econometric models," Resources and Energy, Elsevier, vol. 13(1), pages 111-127, April.
- James G. MacKinnon, 1990.
"Critical Values for Cointegration Tests,"
1227, Queen's University, Department of Economics.
- Tom Doan, . "EGTEST: RATS procedure to compute Engle-Granger test for Cointegration," Statistical Software Components RTS00061, Boston College Department of Economics.
- James G. MacKinnon, 2010. "Critical Values for Cointegration Tests," Working Papers 1227, Queen's University, Department of Economics.
- Alan C. Stockman & Linda L. Tesar, 1995.
"Tastes and Technology in a Two-Country Model of the Business Cycle: Explaining International Comovements,"
NBER Working Papers
3566, National Bureau of Economic Research, Inc.
- Stockman, Alan C & Tesar, Linda L, 1995. "Tastes and Technology in a Two-Country Model of the Business Cycle: Explaining International Comovements," American Economic Review, American Economic Association, vol. 85(1), pages 168-85, March.
- Alan C. Stockman & Linda L. Tesar, 1991. "Tastes and technology in a two-country model of the business cycle: explaining international co-movements," Working Paper 9019, Federal Reserve Bank of Cleveland.
- Robert Lucas & Mike Golosov, 2004.
"Menu Costs and Phillips Curves,"
2004 Meeting Papers
144, Society for Economic Dynamics.
- Kaufmann, Robert K. & Bradford, Andrew & Belanger, Laura H. & Mclaughlin, John P. & Miki, Yosuke, 2008. "Determinants of OPEC production: Implications for OPEC behavior," Energy Economics, Elsevier, vol. 30(2), pages 333-351, March.
- Livernois, John R & Uhler, Russell S, 1987. "Extraction Costs and the Economics of Nonrenewable Resources," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 195-203, February.
- James L. Smith, 2003.
"Inscrutable OPEC? Behavioral Tests of the Cartel Hypothesis,"
0305, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
- James L. Smith, 2005. "Inscrutable OPEC? Behavioral Tests of the Cartel Hypothesis," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 51-82.
- Pindyck, Robert S., 1980.
"The optimal production of an exhaustible resource when price is exogenous and stochastic,"
1162-80., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Pindyck, Robert S, 1981. " The Optimal Production of an Exhaustible Resource When Price is Exogenous and Stochastic," Scandinavian Journal of Economics, Wiley Blackwell, vol. 83(2), pages 277-88.
- Robert K. Kaufmann, Stephane Dees, Pavlos Karadeloglou and Marcelo Sanchez, 2004. "Does OPEC Matter? An Econometric Analysis of Oil Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 67-90.
- Emi Nakamura & Jón Steinsson, 2008. "Five Facts about Prices: A Reevaluation of Menu Cost Models," The Quarterly Journal of Economics, MIT Press, vol. 123(4), pages 1415-1464, November.
- Dibooglu, Sel & AlGudhea, Salim N., 2007. "All time cheaters versus cheaters in distress: An examination of cheating and oil prices in OPEC," Economic Systems, Elsevier, vol. 31(3), pages 292-310, September.
- Claude d'Aspremont & Alexis Jacquemin & Jean Jaskold Gabszewicz & John A. Weymark, 1983.
"On the Stability of Collusive Price Leadership,"
Canadian Journal of Economics,
Canadian Economics Association, vol. 16(1), pages 17-25, February.
- Dolado, Juan José & Jenkinson, Tim & Sosvilla-Rivero, Simón, 1990.
"Cointegration and Unit Roots,"
Open Access publications from Universidad Carlos III de Madrid
info:hdl:10016/3321, Universidad Carlos III de Madrid.
- Pindyck, Robert S, 1978. "The Optimal Exploration and Production of Nonrenewable Resources," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 841-61, October.
- Kim, Sung Hyun & Kim, Tae Heon & Kim, Youngduk & Na, In-Gang, 2001. "Korean energy demand in the new millenium: outlook and policy implications, 2000-2005," Energy Policy, Elsevier, vol. 29(11), pages 899-910, September.
- Lee, Junsoo & Strazicich, Mark C, 2001. " Break Point Estimation and Spurious Rejections with Endogenous Unit Root Tests," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(5), pages 535-58, December.
- Horn, Manfred, 2004. "OPEC's optimal crude oil price," Energy Policy, Elsevier, vol. 32(2), pages 269-280, January.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (barbara racah).
If references are entirely missing, you can add them using this form.