• Initiative -
  • Type KAPSARC journal article
  • Date 9 June 2020
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Abstract

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 fresh perspective on the debate over the relative importance of demand versus supply factors as determinants of previous price movements. When factoring in OPEC’s production, the analysis suggests market stabilization efforts by OPEC. Using more detailed monthly data available only since 2001, we extend and refine Pierru, Smith, and Zamrik’s (2018) analysis of OPEC’s management of spare capacity to offset shocks to demand and supply. Although OPEC’s attempt to identify and offset shocks has not been perfect, we nevertheless conclude that, overall, OPEC’s use of spare capacity has achieved a significant reduction in the volatility of the price of oil. This has been particularly true during the recent OPEC+ period. We also provide an estimate of welfare gains to the global economy that result from OPEC’s effort to reduce price volatility and show how these gains have been distributed geographically.

https://www.iaee.org/en/publications/eeeparticle.aspx?id=328&id=328

IAEE

Authors

Axel Pierru

Program Director Axel is the director of KAPSARC’s Energy and Macroeconomics program. From October 2018 to March 2019, he was KAPSARC’s interim… Axel is the director of KAPSARC's Energy and Macroeconomics program. From October 2018 to March 2019, he was KAPSARC's interim vice president of research. Axel joined KAPSARC in 2011, after spending 15 years at IFP Energies Nouvelles in France, where he led research, consulting and training projects. Axel received his Ph.D. in economics from the Pantheon-Sorbonne University in Paris. He undertakes applied research that combines methodological innovation with practical relevance for policymaking. His research is focused on energy economics, policy, finance, oil pricing, and energy-exporting economies. Axel has been published extensively, with over 40 peer-reviewed journal papers to his name.

Expertise

  • Energy modelling
  • Energy economics
  • Energy policy
  • Oil pricing and finance

Publications See all Axel Pierru’s publications

James L. Smith

James L. Smith

Hossa Almutairi

Research Fellow Hossa is a research fellow at KAPSARC. She is also currently the Think20’s (T20’s) Sherpa and is leading T20 Saudi… Hossa is a research fellow at KAPSARC. She is also currently the Think20's (T20's) Sherpa and is leading T20 Saudi Arabia's secretariat. She is also the lead co-chair of T20 Saudi Arabia's task force "sustainable energy, water and food systems." Before joining KAPSARC, Hossa was a faculty member at the University of Wilfrid Laurier, Canada. Her research interests include developing energy and economic models to study the impact of energy and environmental policies on economies, sustainable development and wealth accounting. Her work aims to provide policymakers and practitioners with decision support tools that can help identify the challenges, opportunities, and solutions associated with moving toward sustainable energy and sustainable business practices. Her work has been published in many peer-reviewed journals. She has a Ph.D. and a master's degree in applied operations research from the University of Waterloo, Canada, and a bachelor's degree in business administration from King Abdulaziz University, Saudi Arabia.

Expertise

  • Developing energy and economic models
  • Analyzing the effects of various policies on an economy
  • Applications of OR to climate change control policies
  • Green supply chain management
  • Large-scale optimization
  • Convex relaxation and decomposition techniques and big data analytics in supply chains.

Publications See all Hossa Almutairi’s publications

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