OPEC’s Pursuit of Market Stability

Pierru, Axel; Smith, James L.; Almutairi, Hossa

doi:10.5547/2160-5890.9.2.apie

Cited by 9 publications

(18 citation statements)

References 19 publications

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“…When measuring the cost in terms of world’s GDP losses caused by the shortfall, Pierru et al . (2020) estimate 6 the parameter

α

to be 1.405 cents per squared barrel per day of a one‐month shortfall (expressed in 2015 prices).…”

Section: Framing Opec’s Objective To Stabilise the Oil Marketmentioning

confidence: 99%

“…Like Pierru et al . (2020), we distinguish three subperiods: September 2001–October 2014 (commodity boom 10 ), November 2014–December 2016 (OPEC’s market‐share campaign) and January 2017–February 2020 (OPEC+ period before the COVID‐19 demand shock). Table 1 compares the volatility of the resulting counterfactual price to that historically observed in each subperiod.…”

Section: Historical Impact Of Opec’s Spare Capacity On Oil Price Volatilitymentioning

confidence: 99%

“…Based 12 on the formulas derived by Pierru et al . (2020), we have:

\begin{matrix} V false(B false) = \sum_{t = 1}^{12} \frac{α Q_{t}^{* 2}}{{(1 + r)}^{t}} ()(, \begin{matrix} left ({normalΦ}_{2} (2 b_{6}, \frac{2 b_{6}}{R_{1, 2}}, R) + {normalΦ}_{2} false(‐ 2 b_{6}, 0, U false) ‐ {normalΦ}_{2} (b_{3}, \frac{b_{3}}{R_{1, 2}}, R) ‐ {normalΦ}_{2} false(‐ b_{3}, 0, U false)) e^{\frac{2 σ_{S}^{2}}{1 ‐ k^{2}}} \\ left & left + false(Φ_{2} (b_{8}, 2 σ_{z}, U) ‐ Φ_{2} (b_{5}, 2 σ_{z}, U) false) e^{2 ()(, σ_{z}^{2} + \frac{σ_{S}^{2}}{1 ‐ k^{2}})} \\ left & left + Φ_{2} (0, 0, R) ‐ Φ_{2} ()(, b_{2}, \frac{b_{2}}{R_{1, 2}}, R) B^{2} \\ left & + 2 ()(, B Φ_{2} ()(, b_{1}, \frac{b_{1}}{R_{1, 2}}, R) ‐ Φ_{2} ()(, b_{6}, \frac{b_{6}}{R_{1, 2}}, R)) e^{σ_{<...>}} \end{matrix}) \end{matrix}

…”

Section: Value Of Opec’s Spare Capacity To the World’s Economymentioning

confidence: 99%

“…Using the parameter estimates given in the previous sections (with

r = 0.04 / 12

based on Pierru and Matar (2014)), Equation () gives the same annual value for OPEC’s spare capacity to the world’s economy as the one calculated by Pierru et al . (2020). Expressed 13 in 2019 prices, the annual value of OPEC’s spare capacity amounts to 193.1 billion US dollars.…”

Section: Value Of Opec’s Spare Capacity To the World’s Economymentioning

confidence: 99%

“…(2018) and Pierru et al . (2020) have developed a structural model to obtain insights about OPEC’s historical use of spare capacity and pursuit of market stability. This paper elaborates on their work and updates their analysis by incorporating the COVID‐19 demand shock until June 2020.…”

Section: Introductionmentioning

confidence: 99%

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The value of OPEC’s spare capacity to the oil market and global economy

2021

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We investigate the extent to which OPEC has succeeded in its self‐stated mission of stabilising the oil market and the implications for the world’s economy. We discuss the modelling framework developed by Pierru, Smith and Zamrik (2018) and Pierru, Smith and Almutairi (2020) and update their analyses. Unstabilised monthly oil prices that would have prevailed in the absence of OPEC’s spare capacity policy are determined for the September 2001–June 2020 period. Overall, OPEC’s management of spare capacity has significantly decreased the monthly volatility of the oil price. Three subperiods (commodity boom, market‐share campaign, OPEC+) can, however, be distinguished in terms of the impact on price volatility. The annual value of OPEC’s spare capacity to the world’s economy is estimated to be 193.1 billion in 2019 US dollars.

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“…When measuring the cost in terms of world’s GDP losses caused by the shortfall, Pierru et al . (2020) estimate 6 the parameter