The effects of the U.S. price control policies on OPEC: lessons from the past
AbstractIn 1973-1974, the U.S. faced the so-called “Energy Crisis” due to the Arab oil embargo and a quadrupling of world crude oil prices by OPEC. This led the U.S. to use a” Price Control” policy in the domestic energy market. The effects of such policy are explored and well documented. However, the responses of OPEC producers to such a policy need further attention. This paper examines the effects of these price controls on OPEC‟s extraction path. It also examines the relation between the harm function and the change in OPEC production. The results show some evidence that OPEC did respond differently to price controls applied by the U.S. For some periods it cut production, while in other periods production levels increased. The results also show some evidence regarding Wirl (2008) that OPEC includes political support as part of its objective function when it comes to oil extraction.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 34624.
Date of creation: 09 Nov 2011
Date of revision:
OPEC; Price Controls; Energy Economics; Oil;
Find related papers by JEL classification:
- C00 - Mathematical and Quantitative Methods - - General - - - General
- C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
- Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
- Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-11-21 (All new papers)
- NEP-CWA-2011-11-21 (Central & Western Asia)
- NEP-ENE-2011-11-21 (Energy Economics)
- NEP-HME-2011-11-21 (Heterodox Microeconomics)
- NEP-REG-2011-11-21 (Regulation)
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.:
- Frech, H E, III & Lee, William C, 1987. "The Welfare Cost of Rationing-by-Queuing across Markets: Theory and Estimates from the U.S. Gasoline Crises," The Quarterly Journal of Economics, MIT Press, vol. 102(1), pages 97-108, February.
- Smith, Rodney T & Phelps, Charles E, 1978. "The Subtle Impact of Price Controls on Domestic Oil Production," American Economic Review, American Economic Association, vol. 68(2), pages 428-33, May.
- Karp, Larry & Newbery, David M, 1991. "OPEC and the U.S. Oil Import Tariff," Economic Journal, Royal Economic Society, vol. 101(405), pages 303-13, March.
- Wirl, Franz, 2008. "Why do oil prices jump (or fall)?," Energy Policy, Elsevier, vol. 36(3), pages 1029-1043, March.
- Agarwal, Vinod B. & Deacon, Robert T., 1985. "Price controls, price dispersion and the supply of refined petroleum products," Energy Economics, Elsevier, vol. 7(4), pages 210-219, October.
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