Download OPEC and the Price of Petroleum: Theoretical Considerations by Michael Rauscher PDF

By Michael Rauscher

ISBN-10: 3642839282

ISBN-13: 9783642839283

1. 1. Oil rate fluctuations and their impression on fiscal functionality Drastic oil fee fluctuations were a tremendous attribute of the realm petroleum marketplace because the starting of the seventies. The oil crises of 1973n4 and 1979/80 have been via a dramatic drop of the oil expense through the first quarters of 1986. ranging from a degree under 2 $ according to barrel in 1972, the spot industry expense of Arabian mild crude oil elevated to a couple 35 $ in 1980, then slowly lowered, and at last fell to thirteen $ in 1986 (annual averages). If per month info are thought of, the peaks of the oil fee stream glance much more dramatic. In December 1980 Arabian crude was once traded for greater than forty $ a barrel, and in August 1986 the fee used to be down at eight $ (see Fig. 1. 1). forty 30 20 10 r o eighty four 88 seventy six eighty seventy two determine 1. 1: The spot industry rate of Saudi-Arabian gentle crude oil! ! info are taken from the Petroleum Economist and the OPEC Bulletin, a number of matters. 2 After the second one global warfare petroleum has develop into crucial power source. in the course of the fifties and sixties its rate used to be rather low in comparison to different power 2 resources like coal and firewood and it tended to force them out of the market.

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Extra resources for OPEC and the Price of Petroleum: Theoretical Considerations and Empirical Evidence

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This saddle-point result is typical for models analysing the use of renewable resources. See for instance Plourde (1970) and Fisher (1981), ch. 3. In his critique of the Devarajan/Fisher mode~ Lasserre (1985) shows that the results change substantially if discovery costs depend on cumulated discoveries. He obtains a rent on future discoveries which is similar to the Hotelling rent that will be discussed in the next section. 87 The concept of user cost has already be mentioned by Keynes (1936) in his 'General Theory', pp.

They are, however, useful for hedging shorter-term risks. Moreover, they have acquired a major role in the process of oil price formation. Futures market prices are available instantaneously on a minute-by-minute basis whereas spot market prices are published with a lag of one day. So the futures market provides information that is not available from the spot market. One can argue that this increase in transparency has had a major impact on the increase of spot market transactions during the early eighties.

This lowers the return on capital and, therefore, the rate of interest. 105 - The level of indebtedness has an impact on the rate of interest. Highly indebted countries face difficulties finding convenient opportunities of further borrowing. Moreover, there is a difference between the interest rate for borrowing and the interest rate for lending. The latter case has been considered by Siebert (1985), p. 134, who shows that there is a kink in the (continuously increasing) price path at the moment the country changes from a borrower to a lender.

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