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An Economic Model of the World Oil Market

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  • Michael Kennedy

Abstract

This paper presents a regional multicommodity economic model of the world oil market. The four sectors of the model are crude production, transportation, refining, and consumption of products. The regions studied are the United States, Canada, Latin America, Europe, the Middle East and Africa, and Asia. In the model the exogenous variables include the regional supply and demand equations, the technology of refining, and government policy variables. The scope of these variables gives the model sufficient information to determine the levels of consumption, production, and price for each commodity in each region, the pattern of world trade flows, and the refinery capital structure and output in each region. The consequences of monopolistic behavior -- implemented through the producing country cartel, OPEC -- can be studied through the simulation of the effects of changes in the export tax. Use of this model shows that the price increases for crude oil which occurred in late 1973 are not likely to persist because the largest producing region -- the Persian Gulf and North Africa -- would have the problem of allocating reduced production levels among the individual countries.

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  • Michael Kennedy, 1974. "An Economic Model of the World Oil Market," Bell Journal of Economics, The RAND Corporation, vol. 5(2), pages 540-577, Autumn.
    • Handle: RePEc:rje:bellje:v:5:y:1974:i:autumn:p:540-577
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    Cited by:

    1. Pompermayer F.M. & Florian M. & Leal J.E., 2002. "A spatial price oligopoly model for refined petroleum products: an application to a Brazilian case," Computing in Economics and Finance 2002 172, Society for Computational Economics.
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    3. Wenming Shi & Zhongzhi Yang & Kevin X. Li, 2013. "The impact of crude oil price on the tanker market," Maritime Policy & Management, Taylor & Francis Journals, vol. 40(4), pages 309-322, July.
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    8. Olufolajimi Oke & Daniel Huppmann & Max Marshall & Ricky Poulton & Sauleh Siddiqui, 2019. "Multimodal Transportation Flows in Energy Networks with an Application to Crude Oil Markets," Networks and Spatial Economics, Springer, vol. 19(2), pages 521-555, June.
    9. Lin, C.Y. Cynthia, 2009. "An Empirical Dynamic Model of OPEC and Non-OPEC," Working Papers 225895, University of California, Davis, Department of Agricultural and Resource Economics.
    10. Martijn Brons & Peter Nijkamp & Eric Pels & Piet Rietveld, 2006. "A Meta-analysis of the Price Elasticity of Gasoline Demand. A System of Equations Approach," Tinbergen Institute Discussion Papers 06-106/3, Tinbergen Institute.
    11. Olufolajimi Oke & Daniel Huppmann & Max Marshall & Ricky Poulton & Sauleh Siddiqui, 2016. "Mitigating Environmental and Public-Safety Risks of United States Crude-by-Rail Transport," Discussion Papers of DIW Berlin 1575, DIW Berlin, German Institute for Economic Research.
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    14. Lin, C.Y. Cynthia, 2008. "Estimating Supply and Demand in the World Oil Market," Working Papers 225893, University of California, Davis, Department of Agricultural and Resource Economics.
    15. Havranek, Tomas & Kokes, Ondrej, 2015. "Income elasticity of gasoline demand: A meta-analysis," Energy Economics, Elsevier, vol. 47(C), pages 77-86.
    16. Walter C. Labys, 1980. "Commodity Models and Their Potential for Latin American Planning," NBER Chapters, in: Commodity Markets and Latin American Development: A Modeling Approach, pages 9-40, National Bureau of Economic Research, Inc.
    17. Labys, Walter C. & Asano, Hiroshi, 1990. "2.2. Process models," Energy, Elsevier, vol. 15(3), pages 237-248.
    18. Nazli Choucri, 1979. "Review Section : Analytical Specifications of the World Oil Market," Journal of Conflict Resolution, Peace Science Society (International), vol. 23(2), pages 346-372, June.
    19. L. A. Rapoport & A. L. Soyster, 1977. "Lorendas: A Computer Based System For The Modeling Of Long‐Range Energy Development And Supplies," Natural Resources Forum, Blackwell Publishing, vol. 2(1), pages 19-36, October.
    20. Walter C. Labys & Chin-wei Yang, 1991. "Advances in the Spatial Equilibrium Modeling of Mineral and Energy Issues," International Regional Science Review, , vol. 14(1), pages 61-94, April.
    21. Hassan Ghassan & Prashanta Banerjee, 2015. "A threshold cointegration analysis of asymmetric adjustment of OPEC and non-OPEC monthly crude oil prices," Empirical Economics, Springer, vol. 49(1), pages 305-323, August.
    22. Cologni, Alessandro & Manera, Matteo, 2014. "On the economic determinants of oil production," Energy Economics, Elsevier, vol. 44(C), pages 68-79.
    23. Boucher, Jacqueline & Smeers, Yves, 1985. "Programmation mathématique et modélisation énergétique," L'Actualité Economique, Société Canadienne de Science Economique, vol. 61(1), pages 24-50, mars.
    24. Kheiravar, Khaled H, 2019. "Economic and Econometric Analyses of the World Petroleum Industry, Energy Subsidies, and Air Pollution," Institute of Transportation Studies, Working Paper Series qt3gj151w9, Institute of Transportation Studies, UC Davis.

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