The effects of the U.S. price control policies on OPEC: lessons from the past

Khalid Kisswani

MPRA Paper from University Library of Munich, Germany

Abstract: In 1973-1974, the U.S. faced the so-called “Energy Crisis” due to the Arab oil embargo and a quadrupling of world crude oil prices by OPEC. This led the U.S. to use a” Price Control” policy in the domestic energy market. The effects of such policy are explored and well documented. However, the responses of OPEC producers to such a policy need further attention. This paper examines the effects of these price controls on OPEC‟s extraction path. It also examines the relation between the harm function and the change in OPEC production. The results show some evidence that OPEC did respond differently to price controls applied by the U.S. For some periods it cut production, while in other periods production levels increased. The results also show some evidence regarding Wirl (2008) that OPEC includes political support as part of its objective function when it comes to oil extraction.

Keywords: OPEC; Price Controls; Energy Economics; Oil (search for similar items in EconPapers)
JEL-codes: C00 C20 Q30 Q40 (search for similar items in EconPapers)
Date: 2011-11-09
New Economics Papers: this item is included in nep-cwa, nep-ene, nep-hme and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:34624

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