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Since 2017, a new coalition of oil producers led by OPEC and Russia (known as OPEC+) implemented production cuts to limit downward pressure on crude prices. The Covid-19 shock led to a temporary collapse of this coalition and to a price war among OPEC+ members, which contributed to the oil price slump that had originally been caused by widespread containment measures. As the oil market balance seems to crucially hinge on the stability of this coalition, we draw on the 2017--2020 experience to assess the effectiveness of OPEC+ in sustaining oil prices. Using a counterfactual analysis based on two complementary structural vector autoregression (SVAR) models, we find that the impact of OPEC+ on the price of oil was small, owing to significant deviations of oil producers from their assigned quotas. On average, without the OPEC+ cuts, the oil price would have been 6 percent (4 USD) lower than observed. [ABSTRACT FROM AUTHOR]

The adoption of hydraulic fracturing (fracking) and horizontal drilling technology substantively altered the structure of oil supply. Using disaggregate state-level data from the U.S, this paper provides empirical evidence that oil supplies are now asymmetric with respect to price changes as a result of the adoption of new production methods. The changed structure of U.S. oil supply—particularly the low supply elasticities for price declines and large supply elasticities for price increases—is consistent with the ineffectiveness of OPEC policies intended to drown fracking American producers in oil. [ABSTRACT FROM AUTHOR]

Structural changes in the oil market, such as the rise of tight oil, are impacting conventional market dynamics and incentives for producers to cooperate. What if OPEC stopped organizing residual production collectively? We develop an equilibrium model to simulate a competitive world oil market from 2020 to 2030. It includes detailed conventional and unconventional oil supplies and financial investment constraints. Our competitive market scenarios indicate that oil prices first decline and tend to recover to reference residual supplier scenario levels by 2030. In a competitive oil market, a reduction in the financial resources made available to the global upstream oil sector leads to increased revenues for lowcost producers such as Saudi Arabia. Compared to the competitive scenario, Saudi Arabia does not benefit from acting alone as a residual supplier, but, under some assumptions, it benefits from being part of a larger group that works collectively as a residual supplier. [ABSTRACT FROM AUTHOR]

Crude oil price plays a crucial role in the trajectory of the economic activity. This paper aims at quantifying the impact of the fundamental drivers of crude oil price, over the period 2008--2017 using monthly data. This period, with sharp fluctuations of crude oil prices, has not been examined thoroughly in the literature. We apply regression analysis to examine the crude oil price drivers, concluding that crude oil price follows mostly market fundamentals, such as consumption, OPEC production, shale production and days ahead consumption for OECD stocks. Results unveil the importance of both factors of demand and supply to affect the price. We also find evidence on the considerable impact of S&P crude oil index, as a "paper oil" market indicator. We do not find evidence from indicators measuring political instability, such as the number of terrorists attacks in oil producing countries, but as well the VIX volatility index, which--besides a market instability index--could also be perceived as an index incorporating political instability. The impact of political factors is not evident in our analysis, possibly because we do not consider related dummy variables. Moreover, the paper applies bivariate VAR and GARCH analysis to examine crude oil price volatility, not finding strong volatility transmission with the examined market indices, namely the S&P crude oil and the VIX indices. [ABSTRACT FROM AUTHOR]

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, and assessing OPEC's limited ability to accurately measure and offset those shocks, we find that OPEC's use of spare capacity has reduced price volatility, perhaps by as much as half. We also apply the principle of revealed preference to infer the implicit loss function that rationalizes OPEC's investment in spare capacity and compare it to other estimates of the cost of crude oil supply shortfalls. That comparison suggests that OPEC's buffer capacity was in line with global macroeconomic needs. [ABSTRACT FROM AUTHOR]

The 2014/2015 oil price collapse surprised the many economists who have published brilliant econometric explanations of oil price behavior. The sharp decline would not have caught Morris Adelman unawares. Professor Adelman's lifelong research focused on the link between market structure and price behavior. His seminal work on industry structure, beginning with grocery retailer A&P, has provided a framework that can be used to explain oil price fluctuations that have occurred over the past four decades. His approach may not be as accurate as the elegant econometric models that dominate today's literature but it does have one clear advantage: it provides far greater clarity on the way forward. [ABSTRACT FROM AUTHOR]

OPEC producers, individually or collectively, often make statements regarding the "fair price " of crude oil. In some cases, the officials commenting are merely affirming the market price prevailing at the time. In many cases, however, we document that they explicitly disagree with contemporaneous oil futures prices. A natural question is whether these "fair price" pronouncements contain information not already reflected in the market price of crude oil. To find the answer, we collect "fair price" statements made from 2000 through 2010 by officials from OPEC or OPEC member countries. Visually, the "fair price" series looks like a sampling discretely drawn (with a lag)from the daily futures market price series. Formally, we use two primary methodologies to establish that "fair price" pronouncements have little influence on the market price of crude oil and provide little or no new news to oil futures market participants. [ABSTRACT FROM AUTHOR]

We investigate the exertion of market power in the global crude oil market over the past years. Recognizing the difficulty of identifying market power in the crude oil market by empirical studies, we propose a numerical partial equi-librium model formulated as a mixed complementarity problem. Our approach allows for strategic behavior in a Nash-Cournot market, a Stackelberg leader-follower game, an OPEC oligopoly or cartel, as well as perfect competition. To take account of liquid spot markets, the model specifically includes arbitragers to capture the effect of global crude oil market integration. Our results indicate a market structure shift over the past years. Reported quantities and prices before the 2008 turmoil are close to those derived from a Stackelberg market simulation, with Saudi Arabia acting as Stackelberg leader vis-a-vis a non-cooperative OPEC oligopoly and a competitive fringe. However, in 2008 and 2009, observed prices are closer to the competitive benchmark. We conclude that OPEC suppliers' ability to exert market power was reduced in the 2008 turmoil and its aftermath. [ABSTRACT FROM AUTHOR]