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An Oil and Gas Model

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  • Noureddine Krichene

Abstract

This paper formulated a short-run model, with an explicit role for monetary policy, for analyzing world oil and gas markets. The model described carefully the parameters of these markets and their vulnerability to business cycles. Estimates showed that short-run demand for oil and gas was price- inelastic, relatively income-elastic, and was influenced by interest and exchange rates; short-run supply was price-inelastic. Short-run price inelasticity could be a source for high volatility in oil and gas prices, and could confer to producers a temporary market power. Being simultaneous and incorporating interest and exchange rates, the model could be useful in short-term forecasting of oil and gas outputs and prices under policy scenarios.

Suggested Citation

  • Noureddine Krichene, 2007. "An Oil and Gas Model," IMF Working Papers 07/135, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:07/135
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    Cited by:

    1. Chevillon, Guillaume & Rifflart, Christine, 2009. "Physical market determinants of the price of crude oil and the market premium," Energy Economics, Elsevier, vol. 31(4), pages 537-549, July.
    2. Noureddine Krichene, 2008. "Crude Oil Prices; Trends and Forecast," IMF Working Papers 08/133, International Monetary Fund.
    3. Shibata, Tsubasa, 2016. "Modeling for the world crude oil and natural gas markets," IDE Discussion Papers 584, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    4. Gatfaoui, Hayette, 2016. "Linking the gas and oil markets with the stock market: Investigating the U.S. relationship," Energy Economics, Elsevier, vol. 53(C), pages 5-16.

    More about this item

    Keywords

    Economic models; Exchange rates; Demand; Crude oil; Interest rates; Natural gas; Monetary policy; Oil shock; Oil prices; Supply; elasticity; exchange rate; impulse response; interest rate; multiplier; gas; oil and gas; oil demand;

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