Lifting Constraints: Venezuelan Oil and Global Market Adjustment

Niloofar Adel, Andrea Bastianin, Luca Pedini and Marta Visconti
Additional contact information
Niloofar Adel: Fondazione Eni Enrico Mattei
Andrea Bastianin: University of Milan and Fondazione Eni Enrico Mattei
Luca Pedini: Marche Polytechnic University and Fondazione Eni Enrico Mattei
Marta Visconti: Fondazione Eni Enrico Mattei

No 2026.12, Working Papers from Fondazione Eni Enrico Mattei

Abstract: We quantify the contribution of Venezuela’s oil sector collapse to changes in global oil market responsiveness after 2007. We extend the multi-country structural model of Baumeister and Hamilton (2024) by modeling Venezuela explicitly and constructing a counterfactual production path that abstracts from the 2007 institutional shift. This counterfactual isolates the mechanical contribution of Venezuelan supply and provides an upper bound on its impact. We document a sharp decline in global short-run supply elasticity and a more than doubling of the oil price multiplier after 2007. Decomposition results show that this increase is driven primarily by a reduction in the effective inventory-related adjustment margin, with changes in other producers’ supply elasticities accounting for most of the remainder. By contrast, Venezuela’s contribution through its production share and contemporaneous supply elasticity is small. Restoring Venezuelan output raises global supply elasticity modestly but has limited effects on price amplification.

Keywords: Crude oil; Sanctions; Supply shocks; Venezuela; OPEC (search for similar items in EconPapers)
JEL-codes: C32 E32 L71 Q43 (search for similar items in EconPapers)
Date: 2026-03
New Economics Papers: this item is included in nep-ene, nep-ifn and nep-min
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
https://feem-media.s3.eu-central-1.amazonaws.com/w ... loads/NDL2026-12.pdf (application/pdf)

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:fem:femwpa:2026.12

Access Statistics for this paper

More papers in Working Papers from Fondazione Eni Enrico Mattei Contact information at EDIRC.
Bibliographic data for series maintained by Alberto Prina Cerai ( this e-mail address is bad, please contact ).