IDEAS home Printed from https://ideas.repec.org/p/diw/diwwpp/dp869.html
   My bibliography  Save this paper

A Model for the Global Crude Oil Market Using a Multi-Pool MCP Approach

Author

Listed:
  • Daniel Huppmann
  • Franziska Holz

Abstract

This paper proposes a partial equilibrium model to describe the global crude oil market. Pricing on the global crude oil market is strongly influenced by price indices such as WTI (USA) and Brent (Northwest Europe). Adapting an approach for pool-based electricity markets, the model captures the particularities of these benchmark price indices and their influence on the market of physical oil. This approach is compared to a model with bilateral trade relations as is traditionally used in models of energy markets. With these two model approaches, we compute the equilibrium solutions for several market power scenarios to investigate whether the multi-pool approach may be better suited than the bilateral trade model to describe the crude oil market. The pool-based approach yields, in general, results closer to observed quantities and prices, with the best fit obtained by the scenario of an OPEC oligopoly. We conclude that the price indices indeed are important on the global crude market in determining the prices and flows, and that OPEC effectively exerts market power, but in a non-cooperative way.

Suggested Citation

  • 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.
  • Handle: RePEc:diw:diwwpp:dp869
    as

    Download full text from publisher

    File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.96394.de/dp869.pdf
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Aune, Finn Roar & Grimsrud, Kristine & Lindholt, Lars & Rosendahl, Knut Einar & Storrøsten, Halvor Briseid, 2017. "Oil consumption subsidy removal in OPEC and other Non-OECD countries: Oil market impacts and welfare effects," Energy Economics, Elsevier, vol. 68(C), pages 395-409.
    2. Egging, Ruud, 2013. "Benders Decomposition for multi-stage stochastic mixed complementarity problems – Applied to a global natural gas market model," European Journal of Operational Research, Elsevier, vol. 226(2), pages 341-353.
    3. Finn Roar Aune & Ann Christin Bøeng & Snorre Kverndokk & Lars Lindholt & Knut Einar Rosendahl, 2017. "Fuel Efficiency Improvements: Feedback Mechanisms and Distributional Effects in the Oil Market," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 68(1), pages 15-45, September.
    4. Clemens Haftendorn & Franziska Holz & Christian von Hirschhausen, 2010. "COALMOD-World: A Model to Assess International Coal Markets until 2030," Discussion Papers of DIW Berlin 1067, DIW Berlin, German Institute for Economic Research.
    5. repec:arp:ijwpds:2016:p:90-93 is not listed on IDEAS

    More about this item

    Keywords

    crude oil; market structure; cartel; pool market; simulation model;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:diw:diwwpp:dp869. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bibliothek). General contact details of provider: http://edirc.repec.org/data/diwbede.html .

    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.

    We have no references for this item. You can help adding them by using 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.