Publications

OPEC’s Pursuit of Market Stability

IAEE

We investigate attempts by the Organization of Petroleum Exporting Countries (OPEC) to stabilize the price of oil during the past fifty years. We first develop a novel decomposition of shifts in global demand and non-OPEC supply. This decomposition provides a…

Axel Pierru, James L. Smith, Hossa Almutairi

Analyzing the Effects of Saudi Arabia’s Economic Reforms Using a Dynamic Stochastic General Equilibrium Model

Jorge Blazquez, Marzio Galeotti, Baltasar Manzano, Axel Pierru, Shreekar Pradhan

Saudi Arabia is the world’s second-largest holder of proved oil reserves and the second-largest producer of petroleum liquids. The country is the largest exporter of crude oil, with a share of 16% of total crude oil exports in 2017. Saudi Arabia’s…

Blazquez, Jorge

Galeotti, Marzio

Manzano, Baltasar

Pierru, Axel

Pradhan, Shreekar

Optimal Policies for Managing Oil Revenue Stabilization Funds: An Illustration Using Saudi Arabia

Science Direct

We develop an analytical approach that offers insights into how governments can better manage an oil-revenue stabilization fund. The model maximizes the expected intertemporal utility of households and consists of decisions that are a function of the fund level and…

Nader AlKathiri, Tarek Atalla, Frederic Murphy, Axel Pierru

Implementing Alternative Pricing Policies in Economic Equilibrium Models Using the Extended Mathematical Programming Framework

Bertrand Rioux, Abdullah AlJarboua, Frederic Murphy, Axel Pierru

Standard economic optimization models represent markets in perfect competition. They are commonly used, though they may not accurately represent real-world policies and regulations. Equilibrium models built using a mixed complementarity problem (MCP) approach are capable of simulating more flexible pricing…

Rioux, Bertrand

AlJarboua, Abdullah

Murphy, Frederic

Pierru, Axel

The Opportunity Cost of Domestic Oil Consumption for an Oil Exporter: Illustration for Saudi Arabia

Fatih Karanfil, Axel Pierru

When appraising investment projects from a public perspective, a barrel of oil displaced from or added to domestic consumption has to be valued at its opportunity cost. This paper develops a partial-equilibrium framework to assess the opportunity cost of domestic…

Karanfil, Fatih

Pierru, Axel

K-DSGE: A Dynamic Stochastic General Equilibrium Model for Saudi Arabia

Jorge Blazquez, Marzio Galeotti, Baltasar Manzano, Axel Pierru, Shreekar Pradhan

This paper describes a dynamic stochastic general equilibrium (DSGE) model of the Saudi Arabian economy, developed by KAPSARC researchers. The K-DSGE model is to be used for simulations and experiments to assess the impact of economic reforms within the Saudi…

Blazquez, Jorge

Galeotti, Marzio

Manzano, Baltasar

Pierru, Axel

Pradhan, Shreekar

Estimating the Household Consumption Function in Saudi Arabia: An Error Correction Approach

Taylor & Francis Online

We estimate a micro-founded life-cycle consumption model for Saudi Arabia over the period 1970–2017 using error correction model procedures. Dynamic adjustments are significant, and both income and wealth are found to have significant effects, with a long-run marginal propensity to…

Goblan Al Gahtani, Carlo Andrea Bollino, Simona Bigerna, Axel Pierru

KAPSARC’s Contribution to Evaluating the Impact of Price Controls

Axel Pierru, Walid Matar

The European Journal of Operational Research has just published a paper, “Measuring the effects of price controls using mixed complementarity models” (2019). It detailed a series of innovative modeling approaches developed by KAPSARC researchers over the last six years. The…

Pierru, Axel

Matar, Walid

Estimating the Household Consumption Function in Saudi Arabia

Goblan Al Gahtani, Carlo Andrea Bollino, Simona Bigerna, Axel Pierru

This research is part of a joint project between the Saudi Arabian Monetary Authority (SAMA) and the King Abdullah Petroleum Studies and Research Center (KAPSARC). This paper estimates a micro-based life cycle consumption model for Saudi Arabia over the period…

Goblan Al Gahtani

Bollino, Carlo Andrea

Bigerna, Simona

Pierru, Axel

The Costs and Gains of Policy Options for Coordinating Electricity Generation in the Gulf Cooperation Council

IDEAS

We investigate the economic impacts of policies for coordinating electricity production in the Gulf Cooperation Council (GCC) through electricity trade. The GCC countries have installed a network of high-voltage transmission lines that links Saudi Arabia, Bahrain, Kuwait, Oman, Qatar, and…

David Wogan, Frederic Murphy, Axel Pierru

The Economic Impact of Price Controls on China’s Natural Gas Supply Chain

Science Direct

Despite significant progress made by China in liberalizing its natural gas market, certain key areas such as market access and pricing mechanisms remain controlled by the government.

Axel Pierru, Kang Wu, Frederic Murphy, Philipp Galkin, Bertrand Rioux, Yan Li, Artem Malov, Felipe Feijoo

Measuring the Effects of Price Controls Using Mixed Complementarity Models

Science Direct

Frederic Murphy, Axel Pierru, Yves Smeers

The Costs and Gains of Coordinating Electricity Generation in the Gulf Cooperation Council Utilizing the Interconnector

David Wogan, Frederic Murphy, Axel Pierru

Countries in the Gulf Cooperation Council (GCC) have installed a network of high-voltage transmission lines, known as the GCC Interconnector, which links the member states of Saudi Arabia, Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates (UAE). The Interconnector…

Wogan, David

Murphy, Frederic

Pierru, Axel

OPEC’s Impact on Oil Price Volatility: The Role of Spare Capacity

Energy Journal

OPEC claims to hold and use spare production capacity to stabilize the crude oil market. We study the impact of that buffer on the volatility of oil prices. After estimating the stochastic process that generates shocks to demand and supply,…

Axel Pierru, Tamim Zamrik

The Economic Impact of Price Controls on China’s Natural Gas Supply Chain

Bertrand Rioux, Philipp Galkin, Frederic Murphy, Axel Pierru, Kang Wu

Despite significant progress made by China in liberalizing its natural gas market, certain key areas such as market access and pricing mechanisms remain heavily monopolized or controlled by the government. To assess how such distortions impact the market, we developed…

Rioux, Bertrand

Galkin, Philipp

Murphy, Frederic

Pierru, Axel

Wu, Kang

The Value of Saving Oil in Saudi Arabia

Jorge Blazquez, Baltasar Manzano, Axel Pierru

What is the value of saving a barrel of oil that would otherwise had been consumed domestically? This study explores the question, taking a long-run perspective into a general equilibrium approach. In the case of Saudi Arabia, the difference between…

Blazquez, Jorge

Manzano, Baltasar

Pierru, Axel

Restructuring Saudi Arabia’s Power Generation Sector: Model-Based Insights

Bertrand Rioux, Axel Pierru, Nader AlKathiri

Saudi Arabia plans to reform and privatize its power generation sector as part of the Kingdom’s Vision 2030. To provide analytical insights, we developed a model that simulates the restructuring of the electricity market, along with reforming fuel prices to…

Rioux, Bertrand

Pierru, Axel

AlKathiri, Nader

Managing Oil Revenue Stabilization Funds: A Framework for Developing Policies

Nader AlKathiri, Frederic Murphy, Axel Pierru

Oil revenue stabilization funds provide short-run protection against oil revenue fluctuations – in the way that Saudi government deposits and reserve at the Saudi Arabian Monetary Authority (SAMA) have historically served as a buffer to decouple government budget from oil…

AlKathiri, Nader

Murphy, Frederic

Pierru, Axel

How do Price Caps in China’s Electricity Sector Impact the Economics of Coal, Power and Wind? Potential Gains from Reforms

Energy Journal

China imposes maximum prices by plant type and region on the electricity that generators sell to utilities. We show that these price caps create a need for subsidies and cross-subsidies, and affect the economics of wind power. We model the…

Bertrand Rioux, Philipp Galkin, Frederic Murphy, Axel Pierru

Efficient industrial energy use: The first step in transitioning Saudi Arabia’s energy mix

Energy Policy

In Saudi Arabia, industrial fuel prices are administered below international prices and firms make decisions based on low energy prices, increasing domestic energy demand. This analysis explores alternative policies designed to induce a transition to a more efficient energy system…

Walid Matar, Frederic Murphy, Axel Pierru, Bertrand Rioux, David Wogan