Cheap talk of supply-demand games in the world oil market

Steady-state growth in a Hotelling model of resource extraction

“…11 These results are consistent with other prior studies (Krautkraemer [9] and references therein; Lin [12,13]). …”

“…3 See Krautkraemer [9] and references therein, Pindyck [17], and Lee, List and Strazicich [10], as well as Lin [12,13] for the case of oil. Slade [20] has shown that mineral prices have followed a U-shaped price path between 1870 through the 1970s, but the coefficients on the quadratic trend are not robust to the period of estimation (Berck and Roberts [2]).…”

OPEC's Market Power: An Empirical Dominant Firm Model for the Oil Market

“…With a competitive model we obtain an insignificant (and marginally positive) demand elasticity -a similar result has been obtained in some previous studies, such as Lin (2011). Using the competitive model, we also obtain a lower income elasticity (around 0.5) and find an insignificant factor price elasticity for OPEC.…”

“…Hamilton (2009) argues that, for some periods, these estimates are probably good approximations, but, in general, they are subject to instabilities. Studies that have taken the simultaneity of supply-and-demand changes into account, as we do, are scarce -some examples are Alhajji and Huettner (2000), Krichene (2002), Almoguera et al (2011), andLin (2011). We contribute to this literature by estimating a simultaneous dominant firm-competitive fringe model for the oil market, using the nonlinear instrumental variable method -the nonlinear estimator reflects the nonlinearity of the system of equations to be estimated.We obtain statistically significant demand and fringe (non-OPEC) supply elasticities.…”

The Price of Oil – Will it Start Rising Again?

“…Attempts to estimate oil supply equations for different groups of countries did not produce meaningful results and also the literature does not provide any clear guidance on the price elasticity of supply as only few studies exist and those few typically obtain mixed results (e.g. Lin, 2011). These difficulties might be related to the existence of a large number of structural breaks in the relationship linked to the discovery of new fields (some of which may involve entirely new types of oil), improvements in extraction techniques and also poor quality of key data such as reserves (Watkins and Streifel, 1998).…”