Working Paper: CEPR ID: DP12047
Authors: Sergio Rebelo; Per Krusell; Gideon Bornstein
Abstract: We use a new micro data set that covers all oil fields in the world to estimate a stochastic industry-equilibrium model of the oil industry with two alternative market structures. In the first, all firms are competitive. In the second, OPEC firms act as a cartel. This effort is a first step towards studying the importance of ongoing structural changes in the oil market in a general- equilibrium model of the world economy. We analyze the impact of the advent of fracking on the volatility of oil prices. Our model predicts a large decline in this volatility.
Keywords: oil; commodities; volatility
JEL Codes: Q4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| demand shocks (E39) | oil prices (L71) |
| supply shocks (E39) | oil prices (L71) |
| demand shocks (E39) | investment in the oil industry (L71) |
| supply shocks (E39) | investment in the oil industry (L71) |
| fracking firms (L71) | volatility of oil prices (Q47) |
| supply shocks (E39) | volatility of OPEC production (Q38) |
| demand shocks (E39) | volatility of non-OPEC production (Q38) |
| supply shocks (E39) | volatility of non-OPEC production (Q38) |