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The World Oil Market: An Examination Using Small-Scale Models


  • David Jay Green


One 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.

Suggested Citation

  • David Jay Green, 1988. "The World Oil Market: An Examination Using Small-Scale Models," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 61-77.
  • Handle: RePEc:aen:journl:1988v09-03-a02

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    References listed on IDEAS

    1. Berndt, Ernst R, 1976. "Reconciling Alternative Estimates of the Elasticity of Substitution," The Review of Economics and Statistics, MIT Press, vol. 58(1), pages 59-68, February.
    2. Griffin, James M & Gregory, Paul R, 1976. "An Intercountry Translog Model of Energy Substitution Responses," American Economic Review, American Economic Association, vol. 66(5), pages 845-857, December.
    3. Ronald E. Findlay & Carlos Alfredo Rodriguez, 1977. "Intermediate Imports and Macroeconomic Policy under Flexible Exchange Rates," Canadian Journal of Economics, Canadian Economics Association, vol. 10(2), pages 208-217, May.
    4. Hall, Robert E, 1978. "The Macroeconomic Impact of Changes in Income Taxes in the Short and Medium Runs," Journal of Political Economy, University of Chicago Press, vol. 86(2), pages 71-85, April.
    5. Hall, Robert E & Lilien, David M, 1979. "Efficient Wage Bargains under Uncertain Supply and Demand," American Economic Review, American Economic Association, vol. 69(5), pages 868-879, December.
    6. Stephen M. Goldfeld, 1976. "The Case of the Missing Money," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 7(3), pages 683-740.
    7. Daniel J.B. Mitchell, 1978. "Union Wage Determination: Policy Implications and Outlook," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 9(3), pages 537-582.
    8. Robert J. Gordon, 1970. "The Recent Acceleration of Inflation and Its Lessons for the Future," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 1(1), pages 8-47.
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    Cited by:

    1. 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.
    2. 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.
    3. 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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    JEL classification:

    • F0 - International Economics - - General


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