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Oil Price Developments: Drivers, Economic Consequences and Policy Responses

Author

Listed:
  • Anne-Marie Brook
  • Robert Price
  • Douglas Sutherland
  • Niels Westerlund
  • Christophe André

Abstract

This paper analyses the factors influencing the price of oil and its likely evolution over the next quarter century. It begins by investigating the fundamental forces shaping long-term oil price developments, highlighting the importance of growth-led demand for oil, particularly that emanating from fast-growing, energy-intensive developing countries, and the implications of increasingly geographically concentrated oil reserves. The paper presents oil price projections to 2030 and examines the sensitivity of the projections to the assumptions about growth and non-OPEC supply. While certain combinations of factors could lead to a significantly higher oil price, the projections also suggest that the optimal strategy of resource-rich oil producers would be to prevent it rising too far. The paper then documents short-term influences on the oil price, which peaked at $50 a barrel in 2004, and notes that they have probably led to a significant departure from the long-run equilibrium price ... Ce document analyse les facteurs qui influencent le prix du pétrole et son évolution probable au cours du prochain quart de siècle. Il examine d’abord les déterminants fondamentaux de l’évolution des prix du pétrole à long terme, en soulignant l’importance de la demande pétrolière alimentée par la croissance, en particulier celle émanant des pays en développement à forte intensité d’énergie et en expansion rapide, ainsi que les conséquences de la concentration géographique croissante des réserves pétrolières. Le document présente des prévisions des prix du pétrole jusqu’à l’horizon 2030 et évalue leur sensibilité aux hypothèses concernant la croissance et l’offre hors OPEP. Tandis que certaines combinaisons de facteurs pourraient se traduire par un prix du pétrole nettement plus élevé, les prévisions montrent aussi que pour les producteurs pétroliers dotés d’abondantes réserves la stratégie optimale consisterait à empêcher une hausse excessive des cours. L’étude décrit ensuite les ...

Suggested Citation

  • Anne-Marie Brook & Robert Price & Douglas Sutherland & Niels Westerlund & Christophe André, 2004. "Oil Price Developments: Drivers, Economic Consequences and Policy Responses," OECD Economics Department Working Papers 412, OECD Publishing.
    • Handle: RePEc:oec:ecoaaa:412-en
    DOI: 10.1787/303505385758
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    Cited by:

    1. Bloch, Harry & Rafiq, Shuddhasattwa & Salim, Ruhul, 2015. "Economic growth with coal, oil and renewable energy consumption in China: Prospects for fuel substitution," Economic Modelling, Elsevier, vol. 44(C), pages 104-115.
    2. Antón, Arturo, 2020. "Taxing crude oil: A financing alternative to mitigate climate change?," Energy Policy, Elsevier, vol. 136(C).
    3. Zhang, Yue-Jun & Yao, Ting, 2016. "Interpreting the movement of oil prices: Driven by fundamentals or bubbles?," Economic Modelling, Elsevier, vol. 55(C), pages 226-240.
    4. Golombek, Rolf & Irarrazabal, Alfonso A. & Ma, Lin, 2018. "OPEC's market power: An empirical dominant firm model for the oil market," Energy Economics, Elsevier, vol. 70(C), pages 98-115.
    5. Johan Gars & Daniel Spiro & Henrik Wachtmeister, 2022. "The effect of European fuel-tax cuts on the oil income of Russia," Nature Energy, Nature, vol. 7(10), pages 989-997, October.
    6. James L. Smith, 2009. "World Oil: Market or Mayhem?," Journal of Economic Perspectives, American Economic Association, vol. 23(3), pages 145-164, Summer.
    7. Leszek Kasek & Jakub Boratyński & Leszek Kąsek, 2016. "LOW OIL PRICES: LONG-TERM ECONOMIC EFFECTS FOR THE EU AND OTHER GLOBAL REGIONS BASED ON THE CGE PLACE model," EcoMod2016 9319, EcoMod.
    8. Desmet, Klaus & Rossi-Hansberg, Esteban, 2015. "On the spatial economic impact of global warming," Journal of Urban Economics, Elsevier, vol. 88(C), pages 16-37.
    9. Su, Chi-Wei & Li, Zheng-Zheng & Chang, Hsu-Ling & Lobonţ, Oana-Ramona, 2017. "When Will Occur the Crude Oil Bubbles?," Energy Policy, Elsevier, vol. 102(C), pages 1-6.
    10. Bräuninger, Michael & Matthies, Klaus & Weinert, Günter & Koller, Cornelia & Pflüger, Wolfgang & Roestel, Axel-Adrian, 2005. "Energierohstoffe. Teil I: Szenarien für die langfristige Entwicklung auf den Märkten für Energierohstoffe. Teil II: Strategieansätze unterschiedlicher Energiepreisszenarien aus der Sicht von Politik, ," Strategy 2030 - Wealth and Life in the Next Generation 1, Hamburg Institute of International Economics (HWWI) and Berenberg.
    11. Ernest Gnan, 2009. "Energy, Commodity and Food Price Volatility: What Policy Responses?," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 10(01), pages 21-28, April.
    12. Jean-Marc Fournier & Isabell Koske & Isabelle Wanner & Vera Zipperer, 2013. "The Price of Oil – Will it Start Rising Again?," OECD Economics Department Working Papers 1031, OECD Publishing.
    13. Yonghong Jiang & Gengyu Tian & Bin Mo, 2020. "Spillover and quantile linkage between oil price shocks and stock returns: new evidence from G7 countries," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 6(1), pages 1-26, December.
    14. Möbert, Jochen, 2007. "Crude Oil Price Determinants," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 35713, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    15. Douwe Kingma & Wim Suyker, 2004. "FAQs about oil and the world economy," CPB Memorandum 104, CPB Netherlands Bureau for Economic Policy Analysis.
    16. Douwe Kingma & Wim Suyker, 2004. "FAQs about oil and the world economy," CPB Memorandum 104.rdf, CPB Netherlands Bureau for Economic Policy Analysis.

    More about this item

    Keywords

    crude oil; energy; market structure; pétrole brut; structure de marché; énergie;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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