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- Title
World Equilibrium Model of the Oil Market.
- Authors
Bornstein, Gideon; Krusell, Per; Rebelo, Sergio
- Abstract
We use new, comprehensive micro data on oil fields to build and estimate a structural model of the oil industry embedded in a general equilibrium model of the world economy. In the model, firms that belong to Organization of the Petroleum Exporting Countries (OPEC) act as a cartel. The remaining firms are a competitive fringe. We use the model to study the macroeconomic impact of the advent of fracking. Fracking weakens the OPEC cartel, leading to a large long-run decline in oil prices. Fracking also reduces the volatility of oil prices in the long run because fracking firms can respond more quickly to changes in oil demand.
- Subjects
ORGANIZATION of Petroleum Exporting Countries; OIL fields; CONSTRUCTION cost estimates; HYDRAULIC fracturing; MARKETING models; PETROLEUM industry
- Publication
Review of Economic Studies, 2023, Vol 90, Issue 1, p132
- ISSN
0034-6527
- Publication type
Article
- DOI
10.1093/restud/rdac019