James L. Smith is Professor Emeritus at Southern Methodist University in Dallas, Texas, where he held the Cary M. Maguire Chair in Oil and Gas Management for 23 years before retiring in 2018. Specializing in energy studies since earning his Ph.D. in Economics from Harvard University in 1977, Dr. Smith has been a prolific researcher and author. His publications on OPEC, energy markets, real options, auction theory, and the oil and gas industry has appeared in numerous academic and trade journals, including the American Economic Review, Journal of Economic Perspectives, Quarterly Journal of Economics, Economic Journal, Journal of Economic Theory, The Energy Journal, Mathematical Geology, Oil and Gas Journal, and World Oil. Dr. Smith is a past president of the International Association for Energy Economics and the recipient of the association’s 2024 award for Outstanding Contributions to the Profession. In addition, Dr. Smith served for 16 years as Co-Editor of The Energy Journal.
Pandemic, Ukraine, OPEC+ and Strategic Stockpiles: Taming the Oil Market in Turbulent Times
With a simple decomposition method, we estimate the monthly shifts in global oil demand and non-OPEC+ supply since 2010. We find evidence that during the January 2017 to December 2023 period, OPEC+ attempted to stabilize the price of crude oil well below the values assessed by market observers. Using a structural model of OPEC+’s behavior, we find that judgmental errors regarding the size of market shocks that OPEC+ attempted to offset significantly increased after the start of the COVID-19 pandemic due to the unprecedented nature and size of those shocks. Despite this, without OPEC+’s actions, the price volatility would have been significantly higher than actual, would have nearly doubled during the pre-pandemic period, and would have been higher by 86% during the pandemic and by 28% during the Ukraine war. Our results also suggest that measures implemented by other countries, such as coordinated releases from national stockpiles of crude oil, reduced price volatility by at least a fifth during the Ukraine war, a factor that OPEC+ appears to have factored into its production plans.
12th November 2024
