IDEAS home Printed from https://ideas.repec.org/a/arp/ijwpds/2016p90-93.html

Can OPEC Cartel Reverse Crude Oil Price Downfall?

Author

Listed:
  • Ibrahim A. Onour

    (Department of Business Administration, School of Management Studies, University of Khartoum, Sudan)

Abstract

This paper employs time varying coefficient approach to assess sensitivity of crude oil price change to a number of factors among which change in OPEC crude production and change in US oil production. Our finding indicate crude oil price is inelastic to OPEC production change, with elasticity varying between 0.09 and 0.13, but elastic to US oil production change with elasticity between 0.99 and 1.05. This imply on average crude oil price is about 8 times more responsive to US supply expansion than to OPEC supply decisions. As a result, OPEC producers have a limited impact on oil price reversal but the withdrawal of the US high cost shale technology producers from crude oil production at low price levels can be more effective driver of oil price rises in the future. Such low level sensitivity of oil price to change in OPEC supply imply, other things remain unchanged, for oil price to rise from the current $45 per barrel to $70 per barrel, OPEC cartel needs to cut its current daily production of 27 million barrels by 8 percent.

Suggested Citation

  • Ibrahim A. Onour, 2016. "Can OPEC Cartel Reverse Crude Oil Price Downfall?," International Journal of World Policy and Development Studies, Academic Research Publishing Group, vol. 2(12), pages 90-93, 12-2016.
    • Handle: RePEc:arp:ijwpds:2016:p:90-93
    as

    Download full text from publisher

    File URL: http://www.arpgweb.com/pdf-files/ijwpds2(12)90-93.pdf
    Download Restriction: no
    File URL: http://www.arpgweb.com/?ic=journal&journal=11&month=12-2016&issue=12&volume=2
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Kalaba, Robert E. & Tesfatsion, Leigh S., 1989. "Time-Varying Linear Regression Via Flexible Least Squares," Staff General Research Papers Archive 11196, Iowa State University, Department of Economics.
    2. Filip Novotný, 2012. "The Link Between the Brent Crude Oil Price and the US Dollar Exchange Rate," Prague Economic Papers, Prague University of Economics and Business, vol. 2012(2), pages 220-232.
    3. Kalaba, Robert & Rasakhoo, Nima & Tesfatsion, Leigh, 1989. "A FORTRAN program for time-varying linear regression via flexible least squares," Computational Statistics & Data Analysis, Elsevier, vol. 7(3), pages 291-309, February.
    4. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    5. Dées, Stéphane & Gasteuil, Audrey & Kaufmann, Robert K. & Mann, Michael, 2008. "Assessing the factors behind oil price changes," Working Paper Series 855, European Central Bank.
    6. repec:aen:journl:2004v25-04-a04 is not listed on IDEAS
    7. repec:aen:journl:2009v30-01-a06 is not listed on IDEAS
    8. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    9. Daniel Huppmann & Franziska Holz, 2009. "A Model for the Global Crude Oil Market Using a Multi-Pool MCP Approach," Discussion Papers of DIW Berlin 869, DIW Berlin, German Institute for Economic Research.
    10. Amano, R. A. & van Norden, S., 1998. "Oil prices and the rise and fall of the US real exchange rate," Journal of International Money and Finance, Elsevier, vol. 17(2), pages 299-316, April.
    11. Dees, Stephane & Karadeloglou, Pavlos & Kaufmann, Robert K. & Sanchez, Marcelo, 2007. "Modelling the world oil market: Assessment of a quarterly econometric model," Energy Policy, Elsevier, vol. 35(1), pages 178-191, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. A. Talha Yalta, 2016. "Bootstrap Inference of Level Relationships in the Presence of Serially Correlated Errors: A Large Scale Simulation Study and an Application in Energy Demand," Computational Economics, Springer;Society for Computational Economics, vol. 48(2), pages 339-366, August.
    2. Robert Socha & Piotr Wdowiński, 2018. "Crude oil price and speculative activity: a cointegration analysis," Central European Journal of Economic Modelling and Econometrics, Central European Journal of Economic Modelling and Econometrics, vol. 10(3), pages 263-304, September.
    3. Mensah, Lord & Obi, Pat & Bokpin, Godfred, 2017. "Cointegration test of oil price and us dollar exchange rates for some oil dependent economies," Research in International Business and Finance, Elsevier, vol. 42(C), pages 304-311.
    4. Kyriaki G. Louka & Nektarios A. Michail, 2024. "Oil prices and the euro exchange rate," International Economics and Economic Policy, Springer, vol. 21(4), pages 969-983, October.
    5. Debi P Bal & Badri N Rath, 2019. "Nonlinear causality between crude oil price and exchange rate: A comparative study of China and India - A Reassessment," Economics Bulletin, AccessEcon, vol. 39(1), pages 592-604.
    6. Sari, Ramazan & Hammoudeh, Shawkat & Soytas, Ugur, 2010. "Dynamics of oil price, precious metal prices, and exchange rate," Energy Economics, Elsevier, vol. 32(2), pages 351-362, March.
    7. Yousaf Raza, Muhammad & Lin, Boqiang, 2021. "Oil for Pakistan: What are the main factors affecting the oil import?," Energy, Elsevier, vol. 237(C).
    8. Panpan Wang & Xiaoxing Liu & Tsungwu Ho & Yishi Li, 2024. "The effect of the US dollar exchange rate on oil prices: An oil financialization perspective," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(2), pages 1301-1317, April.
    9. Sari, Ramazan & Soytas, Ugur & Hacihasanoglu, Erk, 2011. "Do global risk perceptions influence world oil prices?," Energy Economics, Elsevier, vol. 33(3), pages 515-524, May.
    10. Khraief, Naceur & Shahbaz, Muhammad & Mahalik, Mantu Kumar & Bhattacharya, Mita, 2021. "Movements of oil prices and exchange rates in China and India: New evidence from wavelet-based, non-linear, autoregressive distributed lag estimations," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 563(C).
    11. De Vita, Glauco & Trachanas, Emmanouil, 2016. "‘Nonlinear causality between crude oil price and exchange rate: A comparative study of China and India’ — A failed replication (negative Type 1 and Type 2)," Energy Economics, Elsevier, vol. 56(C), pages 150-160.
    12. Ghosh, Sajal, 2009. "Import demand of crude oil and economic growth: Evidence from India," Energy Policy, Elsevier, vol. 37(2), pages 699-702, February.
    13. Bruce Morley, 2009. "A Comparison of Two Alternative Monetary Approaches to Exchange Rate Determination over the Long-Run," International Econometric Review (IER), Econometric Research Association, vol. 1(2), pages 63-76, September.
    14. Muhammad AJMAIR & Khadim HUSSAIN & Sabahat AKRAM & Ambreen ZEB, 2017. "What determines the growth of services sector in Pakistan? A comparison of ARDL bound testing and time varying parametric estimation with general to specific approach," Turkish Economic Review, KSP Journals, vol. 4(3), pages 308-319, September.
    15. 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.
    16. Naseem, N.A.M & Tan, Hui-Boon & Hamizah, M.S, 2008. "Exchange Rate Misalignment, Volatility and Import Flows in Malaysia," MPRA Paper 41571, University Library of Munich, Germany.
    17. Md.Yousuf & Raju Ahmed & Nasrin Akther Lubna & Shah Md. Sumon, 2019. "Estimating the Services Sector Impact on Economic Growth of Bangladesh: An Econometric Investigation," Asian Journal of Economic Modelling, Asian Economic and Social Society, vol. 7(2), pages 62-72, June.
    18. Shahbaz, Muhammad & Song, Malin & Ahmad, Shabbir & Vo, Xuan Vinh, 2022. "Does economic growth stimulate energy consumption? The role of human capital and R&D expenditures in China," Energy Economics, Elsevier, vol. 105(C).
    19. Sholih Nugroho Hadi & Rebecca H. Chung, 2022. "Estimation of Demand for Beef Imports in Indonesia: An Autoregressive Distributed Lag (ARDL) Approach," Agriculture, MDPI, vol. 12(8), pages 1-12, August.
    20. Nisamudheen, P.P. & Shareef, K. Hassan, 2025. "The role of human capital in driving renewable energy and sustainable development in India," Utilities Policy, Elsevier, vol. 95(C).

    More about this item

    Keywords

    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arp:ijwpds:2016:p:90-93. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Managing Editor (email available below). General contact details of provider: http://arpgweb.com/index.php?ic=journal&journal=11&info=aims .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.