Prospects for the international oil market

The OPEC price conference in Geneva on May 25–26, 1981 did not resolve the disagreement among OPEC member countries over official prices. As a result of this stalemate, Saudi Arabia with its intention to moderate prices will in the foreseeable future probably not be prepared to make substantial reductions in its high volume of production with which it puts pressure on prices. What short- and medium-term perspectives for the international oil market arise from this situation?     

Production cuts to support oil prices

Most commodity quotations have continued to fall in recent months as a result of the weaker global economy. Crude oil prices, on the other hand, had been maintained at the high level targeted by OPEC since the start of the year, but lately they, too, have started to fall. Is the success of the oil exporters' change in production policy built to last?     

Oil Market at a Turning Point?

Crude oil prices have fallen markedly during recent months, so much so that the OPEC countries finally took action and resolved to curb production levels. Is the oil market becoming accustomed to ongoing geopolitical risks, and are oil price developments now being more strongly determined by fundamental market data once again?     

Crude oil prices and the balance of trade: Asymmetric evidence from selected OPEC member countries

The contribution of this article is to assess whether the effects of crude oil price fluctuations on the trade balance are symmetric or asymmetric in the context of an individual oil-exporting country, specifically four OPEC member countries – Iran, Nigeria, Saudi Arabia, and Venezuela. To examine this subject thoroughly, we use three different measures of trade balances such as oil trade balance, non-oil trade balance, and total trade balance, and examine whether oil prices are asymmetrically passed on to the trade balances for those OPEC countries in the long- and short-run. After implementation of the nonlinear autoregressive distributed lag (ARDL) model, we find that changes in oil prices indeed have asymmetric effects on the oil trade balance for all four OPEC countries in the long-run, though not in the short-run. In the case of the non-oil and total trade balance, however, the asymmetry of oil price changes is not detected in both the long- and short-run.     

Ten years after the first oil crisis— OPEC's past and future

In October 1973 OPEC sprang the first “oil shock” on the oil-importing countries. The member states took over the pricing of their petroleum and within three months prices had climbed to an unprecedented level. Only then did OPEC impress itself upon the public consciousness, although the organisation had been set up as long ago as 1960. Now, ten years later, the continuing oil glut has created the most difficult situation the organisation has faced since its inception. Is OPEC now slipping from the position it won in the seventies?     

Steadying of oil prices

Oil prices have fallen below the 30 dollar mark sooner than expected. In March they were in the lower half of OPEC’s target price band. Will OPEC manage to maintain high prices and revenues by restricting production?     

The foreign trade of the OPEC states

The changes brought about in the OPEC states by their oil are reflected most clearly in the foreign trade¹. How did their trade develop during the present decade? What will be the outcome of the latest drastic oil price increases?     

Do investors learn about analyst accuracy? A study of the oil futures market

We study the impact of analyst forecasts on prices to determine whether investors learn about analyst accuracy. The straight‐forward relationship between supply and price, the economic importance of the market, the predictable timing of forecast error realizations, and the high frequency of the data make the crude oil market an interesting and advantageous setting. We find that prices rise (fall) when analysts forecast a decrease (increase) in supplies. During the 15 minutes following supply announcements, prices rise (fall) when forecasts have been too high (low). Importantly, both relationships are stronger for more accurate analysts, implying that investors learn about analyst accuracy. © 2009 Wiley Peridocals, Inc. Jrl Fut Mark 29:414–429, 2009     

The international transmission of oil-price effects and OPEC's pricing policy

Analyses of oil-price effects generally maintain the assumption that oil importers can be treated as small economies, which allows oil-price changes to be treated as exogenously set by OPEC. Analyses of oil-price determination rely on the assumption that the demand for oil is a stable function, which implies that real income of oil importers is unaffected by oil-price changes. Our analysis treats oil prices and economic activity as jointly determined. The effects of exogenous oil-price changes are studied in a simple theoretical world model. Hotelling's analysis is generalized to allow for both oil-price feedback effects and stabilization policies.     

The petrodollars and the world economy

The quadrupling of the oil price by the OPEC in 1973 was a poignant event in the post-war development of the world economy. Which measures and mechanisms conduced to the international income redistribution necessitated by the hoisting of the oil prices in the past five years?     

Energy and oil in Eastern Europe— Status and prospects

The energy economies of the states in Eastern Europe—East Germany, Poland, Hungary, Czechoslovakia, Bulgaria and Romania—are in a state of transition.¹ This is just one aspect of their overall transition from communism to more liberal political and economic systems. Future developments of the energy sectors in Eastern Europe and the Soviet Union will have important implications for world oil and energy market developments, since these countries comprise, as a group, the world's largest oil and gas producers, and they are the second largest energy consumers in the world.     

Time‐varying market price of risk in the crude oil futures market

In this study, a three‐factor model of crude oil prices is estimated, which incorporates a time‐varying market price of risk. The model is able to accurately capture the term structure of futures prices with evidence suggesting that risk premiums in the crude oil market are time‐varying. Using the cross‐section of futures prices, we estimate a time‐series of the market price of risk in the crude oil market implied by the model. We find that the risk premiums in the crude oil market are driven by the same risk factors as equity and bond markets. © 2010 Wiley Periodicals, Inc. Jrl Fut Mark 31:779–807, 2011     

Oil volatility and the option value of waiting: An analysis of the G‐7

There has recently been considerable interest in the potential adverse effects associated with excessive uncertainty in energy futures markets. Theoretical models of investment under uncertainty predict that increased uncertainty will tend to induce firms to delay production and investment. These models are widely utilized in capital budgeting and production decisions, particularly in the energy sector. There is relatively little empirical evidence, however, on whether such channels have effects on industrial production. Using a sample of G7 countries we examine whether uncertainty about a prominent commodity—oil—affects the time series variation in industrial production. Our primary result is consistent with the predictions of real options theory—uncertainty about oil prices has had a negative and significant effect on manufacturing activity in Canada, France, UK, and US. © 2010 Wiley Periodicals, Inc. Jrl Fut Mark 31:679–702, 2011     

Government influence on energy prices

There is now widespread agreement that, in the interest of energy conservation and substitution of oil, consumer prices for energy should reflect world market prices while taking account of longer-term trends. Are the energy policies of the major industrialised countries in conformity with this demand?     

Free samples, profits, and welfare: The effect of market structures and behavioral modes

This paper addresses an important and underresearched issue in the economics and marketing literatures: what are the managerial and social consequences when firms use business models that are based on the dissemination of free samples? We develop an analytical model of free samples for both digital and physical goods that addresses three fundamental managerial and social questions. First, what is the effect of different market structures (i.e., monopoly and oligopoly) and cost structures on optimal marketing policy and prices? Second, what is the effect of different behavioral modes on prices and free samples? Third, how do different market structures and behavioral modes affect social welfare?The main conclusion is that a number of standard results do not hold when firms have the option of selling products and of distributing free samples. For example, the optimal strategy for oligopolists who produce homogeneous goods and coordinate their marketing policies is to increase - not decrease - the quantity of sold output. Similarly, under well-defined cost and demand conditions, monopoly can lead to a socially inferior outcome to competition. From a policy viewpoint, the managerial and social welfare implications of free samples depend on the type of market structure (monopoly or oligopoly) and the behavioral modes chosen by the firms in an industry (e.g., whether to coordinate their free sample policies or to behave non-cooperatively).     

Why World Oil Monopolization Lowers Oil Prices: A Theory of Involuntary Cartelization

This paper first shows that, in the absence of long-term production commitments, time-consistent monopolistic sellers of a wasting natural resource will underconserve their resource. Since the present values of the profits of these uncommitted monopolists are generally much lower than under competition, the only rational explanation for the persistent recurrence of such monopolies in the oil industry is the high profits to current generations of oil buyers, who unite to establish such a producer monopoly. The victims of such a monopolistic cartel, besides future generations of consumers, are the producers who must involuntarily expand their current productive capacities in order to benefit the cartel leaders, who stand to benefit from the higher future prices. OPEC, rather than being a monopolistic cartel, is an excess-capacity cartel, one that has been induced by current generations of buyers to supply sufficient excess capacity to efficiently accommodate their prospective future emergencies.     

International trade in oil: Effects on the balance of payments and exchange rates

Oil price increases and the persistent OPEC current account surpluses were considered the main problems of economic development in many industrial and developing countries long after the first oil crisis. Since 1983, however, the OPEC surpluses have been completely absorbed and the official base price of petroleum has fallen for the first time in twenty years, although admittedly in terms of a “strong” dollar. Has the serious damage suffered by oil-importing countries in the two oil shocks been completely neutralised, or are the economies of many countries still strongly influenced by the actions and decisions of the OPEC countries?     

Do market prices correspond with consumer demands? Combining market valuation and consumer utility for extra virgin olive oil quality attributes in a traditional producing country

The objective of this research is to examine whether there is a relationship between the value of attributes based on the market price and on consumer utilities. To address this objective, the results from a hedonic price (HP) approach are combined with the actual consumer utilities from a real choice experiment (RCE) for extra virgin olive oil (EVOO) attributes. The results indicate that the origin of production attribute positively influences consumer utility and it is also positively related to market EVOO prices. Conversely, the PDO quality certification positively influences consumer utility and willingness to pay, although it is not related to EVOO prices in the real market.     

Transitory real‐time property rights and exchange intellectual property

American exchanges own the price quotations they generate. Access to real‐time price information is highly valued by most market participants. This enables exchanges to exact royalties from the sale of such market information. In this sense, an exchange's ownership of its price quotations is akin to owning a property right in a perishable commodity (i.e., fresh market price quotations) that is most valuable for only a transitory or limited period of time. The implications of exchange ownership of price data extend beyond financial markets. Recently, Woodard (2000) has noted that some internet auction operators have asserted ownership over the prices they generate. This study reviews the legal origin and nature of the property right to price quotations generated on U.S. futures exchanges and assesses whether exchange ownership should be transitory. The legal basis for transitory real‐time (real and personal) property rights is discussed and the economic implications are considered. © 2003 Wiley Periodicals, Inc. Jrl Fut Mark 23:891–913, 2003     

Upgrade pricing, market growth, and social welfare

This paper studies the monopolist's dynamic pricing strategy when introducing successive generations of a durable product. We show that when consumers are semi-anonymous or exactly identified and the innovation is minor, the firm always offers an upgrade discount to former customers. However, the discount depends only on the quality of the old product. In contrast, for moderate and major innovations, the discount depends on the qualities and costs of both the old and the new products. The market growth rate affects the firm's pricing strategy only if consumers are anonymous; furthermore, the effect on prices depends on the discount rate and whether the market growth rate is high or low. For minor innovations, social welfare is maximized if consumers are anonymous. An interesting and paradoxical result is that, when innovations are moderate or major and consumers are semi-anonymous or exactly identified, price discrimination can actually lead to higher social welfare.