Monopoly power in the oil market and the macroeconomy

Nicole Branger, René Marian Flacke and Nikolai Gräber

Energy Economics, 2020, vol. 85, issue C

Abstract: This paper studies the macroeconomic consequences of oil price shocks caused by innovations in the monopoly power in the oil market. Monopoly power is interpreted as oil producers' ability to charge a markup over marginal costs. We propose a novel way to identify markup shocks based on meetings of the OPEC and show their unique macroeconomic consequences compared to supply and demand shocks. In particular, global real economic activity expands when oil producers' monopoly power rises. A general equilibrium model suggests that higher monopoly profits attract investments in oil producing capital which drive down marginal costs and stimulate economic growth.

Keywords: Monopoly; OPEC; Oil shocks; VAR; DSGE; Real business cycle (search for similar items in EconPapers)
JEL-codes: C32 E23 E32 L12 L71 Q43 (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:85:y:2020:i:c:s0140988319303925

DOI: 10.1016/j.eneco.2019.104597

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