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OPEC in the Epoch of Globalization: An Event Study of Global Oil Prices

Author

Listed:
  • Bina Cyrus

    (University of Minnesota, Distinguished Research Professor of Economics and Management, Morris)

  • Vo Minh

    (University of Minnesota, Assistant Professor of Economics and Finance, Morris)

Abstract

This article confirms that OPEC is neither a cartel nor exhibits any sign of market domination, market control, or monopoly. This confirmation is also in accord with the pioneering account of the competitive differential oil rents formed across the global industry since the crises of the 1970s. The methodology utilized in this study is known as the event-study, an innovative econometric method which attempts to investigate the possible influence of OPEC decisions on output upon the global oil spot and futures prices during the period of 1983-2005. The significance of this investigation is due to the fact that the apparent ``lumpiness" of OPEC has to have no bearing on a priori acceptance of ``perfect competition" as opposed to ``imperfect competition"-a tautological hallmark of neoclassical theory utilized in the bulk of both orthodox and heterodox literature on oil. And, by implication, neither has the neoclassical parlance of rent, as ``market imperfection" and/or ``market power," any bearing on the globally competitive differential oil rents earned by the rentier states. OPEC is reflective of the competitive differential oil rents earned by its members; and, contrary to both the right and the left, and their obfuscating echo in the media, it rolls with the heavy-handed punches of global market in the present epoch. This study is rather a posteriori investigation that deals with the reality of competition in the Schumpeterian framework-a reality that, far from the fiction of textbook competition, is neither perfect nor imperfect.

Suggested Citation

  • Bina Cyrus & Vo Minh, 2007. "OPEC in the Epoch of Globalization: An Event Study of Global Oil Prices," Global Economy Journal, De Gruyter, vol. 7(1), pages 1-52, February.
    • Handle: RePEc:bpj:glecon:v:7:y:2007:i:1:n:2
    DOI: 10.2202/1524-5861.1236
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    Citations

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    Cited by:

    1. Amélie Charles & Olivier Darné, 2016. "Stock market reactions to FIFA World Cup announcements: An event study," Economics Bulletin, AccessEcon, vol. 36(4), pages 2028-2036.
    2. Vo, Minh T., 2009. "Regime-switching stochastic volatility: Evidence from the crude oil market," Energy Economics, Elsevier, vol. 31(5), pages 779-788, September.
    3. Nonejad, Nima, 2017. "Parameter instability, stochastic volatility and estimation based on simulated likelihood: Evidence from the crude oil market," Economic Modelling, Elsevier, vol. 61(C), pages 388-408.
    4. Mensi, Walid & Hammoudeh, Shawkat & Yoon, Seong-Min, 2014. "How do OPEC news and structural breaks impact returns and volatility in crude oil markets? Further evidence from a long memory process," Energy Economics, Elsevier, vol. 42(C), pages 343-354.
    5. Marks Andrew, 2013. "The Globalization of the Australian Textile, Clothing, Footwear and Motor Vehicle Industries: Results in Line with Other Western Market Economies," Global Economy Journal, De Gruyter, vol. 13(1), pages 129-150, January.
    6. Chun, Dohyun & Cho, Hoon & Kim, Jihun, 2019. "Crude oil price shocks and hedging performance: A comparison of volatility models," Energy Economics, Elsevier, vol. 81(C), pages 1132-1147.
    7. Herrera, Ana María & Hu, Liang & Pastor, Daniel, 2018. "Forecasting crude oil price volatility," International Journal of Forecasting, Elsevier, vol. 34(4), pages 622-635.
    8. Edgardo Cayon & Natalia Andrea Garzon & Juan Sebastian Perez, 2019. "The Effects of Global, Regional, and Local Macroeconomic Events on the Price of the Colombian Castilla Blend," International Journal of Energy Economics and Policy, Econjournals, vol. 9(6), pages 118-123.
    9. Franklin Obeng†Odoom, 2018. "Transnational Corporations and Urban Development," American Journal of Economics and Sociology, Wiley Blackwell, vol. 77(2), pages 447-510, March.
    10. Mensi, Walid & Hammoudeh, Shawkat & Nguyen, Duc Khuong & Yoon, Seong-Min, 2014. "Dynamic spillovers among major energy and cereal commodity prices," Energy Economics, Elsevier, vol. 43(C), pages 225-243.
    11. Wu, Ling & Hock Ow, Siew, 2021. "The Impact of News Sentiment on the Stock Market Fluctuation: The Case of Selected Energy Sector," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 55(3), pages 1-21.
    12. Loutia, Amine & Mellios, Constantin & Andriosopoulos, Kostas, 2016. "Do OPEC announcements influence oil prices?," Energy Policy, Elsevier, vol. 90(C), pages 262-272.
    13. Afees A. Salisu & Ismail O. Fasanya, 2012. "Comparative Performance of Volatility Models for Oil Price," International Journal of Energy Economics and Policy, Econjournals, vol. 2(3), pages 167-183.
    14. Shen, Yiran & Sun, Xiaolei & Ji, Qiang & Zhang, Dayong, 2023. "Climate events matter in the global natural gas market," Energy Economics, Elsevier, vol. 125(C).
    15. Monadjemi Mehdi S., 2011. "Monetary Policy and Oil Prices," Global Economy Journal, De Gruyter, vol. 11(3), pages 1-18, September.

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