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WHAT IS LEFT TODAY? ANALYZING OPEC’S INFLUENCE ON THE CRUDE OIL PRICE

WHAT IS LEFT TODAY? ANALYZING OPEC’S INFLUENCE ON THE CRUDE OIL PRICE This paper briefly examines whether OPEC is able to keep the crude oil price above long-term marginal extraction costs. A comprehensive analysis of the most important determinants of both the oil price and extraction costs reveals a coherent picture of how those forces interact. We find that in contrast to previous oil price surges, global demand and supply factors as well as broader geopolitical uncertainties have played a much greater role in the recent past. The fading market power of OPEC is related to its instability as a group to act homogeneously. Instead, each country is likely comply with OPEC agreements only as long as they are aligned with own political and economic interests. JEL codes: L72; O13; P28; Q27; Q32 Keywords: OPEC; oil price determinants; extraction costs; Hotelling rule; resource pragmatism and nationalism; global demand http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Self-Governance and Management Economics Addleton Academic Publishers

WHAT IS LEFT TODAY? ANALYZING OPEC’S INFLUENCE ON THE CRUDE OIL PRICE

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Publisher
Addleton Academic Publishers
Copyright
© 2009 Addleton Academic Publishers
ISSN
2329-4175
eISSN
2377-0996
Publisher site
See Article on Publisher Site

Abstract

This paper briefly examines whether OPEC is able to keep the crude oil price above long-term marginal extraction costs. A comprehensive analysis of the most important determinants of both the oil price and extraction costs reveals a coherent picture of how those forces interact. We find that in contrast to previous oil price surges, global demand and supply factors as well as broader geopolitical uncertainties have played a much greater role in the recent past. The fading market power of OPEC is related to its instability as a group to act homogeneously. Instead, each country is likely comply with OPEC agreements only as long as they are aligned with own political and economic interests. JEL codes: L72; O13; P28; Q27; Q32 Keywords: OPEC; oil price determinants; extraction costs; Hotelling rule; resource pragmatism and nationalism; global demand

Journal

Journal of Self-Governance and Management EconomicsAddleton Academic Publishers

Published: Jan 1, 2015

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