An econometric model of the petroleum industry

This paper describes a forty-two nonlinear equation model of the U.S. petroleum industry estimated over the period 1946 to 1973. The model specifies refinery outputs and prices as being simultaneously determined by market forces while the domestic output of crude oil is determined in a block-recursive segment of the model. The simultaneous behavioral equations are estimated with nonlinear two-stage least-squares adjusted to reflect the implications of autocorrelation for those equations where it appears to be a problem. A multi-period sample simulation, together with forecasts for 1974 and 1975 are used to evaluate the model's performance. Finally it is used to forecast to 1985 under two scenarios and compared with the Federal Energy Administration's forecast for the same period.