A World Equilibrium Model of the Oil Market

Gideon Bornstein, Per Krusell and Sergio Rebelo

The Review of Economic Studies, 2023, vol. 90, issue 1, 132-164

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.

Keywords: Oil; Fracking; Commodities; Volatility; Q4 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://hdl.handle.net/10.1093/restud/rdac019 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:90:y:2023:i:1:p:132-164.

Access Statistics for this article

The Review of Economic Studies is currently edited by Thomas Chaney, Xavier d’Haultfoeuille, Andrea Galeotti, Bård Harstad, Nir Jaimovich, Katrine Loken, Elias Papaioannou, Vincent Sterk and Noam Yuchtman

More articles in The Review of Economic Studies from Review of Economic Studies Ltd
Bibliographic data for series maintained by Oxford University Press ().