A World Equilibrium Model of the Oil Market

Gideon Bornstein, Per Krusell and Sergio Rebelo ()

No 23423, NBER Working Papers from National Bureau of Economic Research, Inc

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 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.

JEL-codes: Q4 Q43 (search for similar items in EconPapers)
Date: 2017-05
New Economics Papers: this item is included in nep-dcm and nep-ene
Note: EFG
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Citations: View citations in EconPapers (12)

Published as Gideon Bornstein & Per Krusell & Sergio Rebelo, 2023. "A World Equilibrium Model of the Oil Market," The Review of Economic Studies, vol 90(1), pages 132-164.

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