Historical and Variance Decomposition for Oil Price, Oil Consumption, OPEC and Non-OPEC Oil Production

Somayeh Azami (), Shahram Fattahi () and Mehdi Rezaei ()
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Somayeh Azami: Department of Economics, Faculty of Social Science and Education, Razi University, Kermanshah, Iran.
Shahram Fattahi: Department of Economics, Faculty of Social Science and Education, Razi University, Kermanshah, Iran.
Mehdi Rezaei: Department of Economics, Faculty ofSocial Science and Education, Razi University, Kermanshah, Iran.

Iranian Economic Review (IER), 2017, vol. 21, issue 3, 519-541

Abstract: In this paper, the behavior of the real oil price and OPEC and non-OPEC oil productionduring 1973-2013 are modelled. Interactions among OPEC, non-OPEC oil production, global oil consumption, and the real price of crude oil are estimated using a Structural VAR model (SVAR). Afterproviding evidence forthe structural breaksin oil price in 1996, the results indicate that,according to variance decomposition analysis,during the two periods of 1973-1996and 1997-2013, OPEC oil production respondedsignificantly to positive shocks of global oil consumptionand non-OPEC oil production responded significantly to shocks of OPECoil production. DuringtheOPEC era(1973-1996), real oil price respondedsignificantly to positive shocks of OPEC oil production and during the new industrial age (1997-2013)responded significantly to positive shocks of global oil consumption. According to historical decomposition, the cumulativeeffects of structural shocks of non-OPEC oil production and price on OPEC oil production are greater than the cumulative effects of structural shocks of OPEC oil production and real oil price on non-OPEC oil production.Also, cumulativeeffectsof structural shocks of OPEC oil production onreal oil pricearegreater than cumulative effect of structural shocks of non-OPEC oil production on real oil price.

Keywords: OPEC Oil Production; Non-OPEC Oil Production; Global Oil Consumption; Oil Price. (search for similar items in EconPapers)
Date: 2017
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