Journal article
The Market Equilibrium of OPEC's Pricing Mechanism
The Journal of energy and development, Vol.16(1), pp.133-145
01 Oct 1990
Abstract
This paper examines the dynamic stability and the target price-based market equilibrium for the pricing mechanism of the Organization of Petroleum Exporting Countries (OPEC) using a linear specification of the demand curve and oil market data for the first quarter of 1991. It was found that while the mechanism gives rise to a stable focus, OPECs current target price and output ceiling are grossly inconsistent under a wide spectrum of demand elasticities for its oil. For a range of elasticities between 0.3 and 0.8 and a target price of $21 a barrel, OPECs output ceiling exceeds its equilibrium market demand by 3 to 4.5 million barrels a day. It is shown that OPEC can converge to its targets more rapidly by varying the speed of quantity ceiling adjustment during the convergence process.
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Details
- Title
- The Market Equilibrium of OPEC's Pricing Mechanism
- Creators
- Shawkat HammoudehVibhas Madan
- Publication Details
- The Journal of energy and development, Vol.16(1), pp.133-145
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Bennett S. LeBow College of Business
- Identifiers
- 991020594706104721