WESTERN HEMISPHERE PERSPECTIVES: OIL AND NATURAL GAS

M. A. Adelman

Contemporary Economic Policy, 1985, vol. 3, issue 4, 3-12

Abstract: Among nations that are net oil exporters, those that are net importers, and those in balance, there are conflicting interests regarding the price level—which currently is many times the competitive level. However, avoiding too brusque a price change is in the interest of all. A glut was no barrier to price increases after 1973, nor in 1978. And a glut is not an absolute barrier even today. Nations which comprise the oil cartel have short horizons and high discount factors. This increases the likelihood that they will attempt price hikes and makes any equilibrium precarious. Even non‐cartel nations produce less oil and gas than would be profitable because governments, responding to public opinion, try to obtain more rent than there is to take. These governments apparently use unrealistically low discount rates. This paper attempts to point out parallel, common, and conflicting interests among the nations of the Western Hemisphere regarding price and production policy on crude oil and natural gas. In crude oil and oil products, Argentina is in balance, and Canada is practically so. Venezuela and Ecuador, both OPEC members, are net exporters. Mexico, a de facto member of OPEC, has observed a self‐imposed quota more faithfully than some OPEC members. The rest of the nations in the hemisphere are net importers.

Date: 1985
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