OPEC 'Fair Price' Pronouncements and the Market Price of Crude Oil

Energy Journal, Vol. 34, No. 4, 2013

Posted: 17 Nov 2012 Last revised: 6 Oct 2013

See all articles by Celso Brunetti

Celso Brunetti

Board of Governors of the Federal Reserve System

Bahattin Buyuksahin

CoMeX Consulting and Advising

Michel A. Robe

University of Illinois at Urbana-Champaign

Kirsten R. Soneson

Commodity Futures Trading Commission (CFTC)

Date Written: November 15, 2012

Abstract

OPEC producers, individually or collectively, often make statements regarding the “fair price” of crude oil. In some cases, the officials commenting are merely affirming the market price prevailing at the time. In many cases, however, we document that they explicitly disagree with contemporaneous oil futures prices. A natural question is whether these “fair price” pronouncements contain information not already reflected in the market price of crude oil. To find the answer, we collect “fair price” statements made from 2000 through 2010 by officials from OPEC or OPEC member countries. Visually, the “fair price” series looks like a sampling discretely drawn (with a lag) from the daily futures market price series. Formally, we use two primary methodologies to establish that “fair price” pronouncements have little influence on the market price of crude oil and supply little or no new news to oil futures market participants.

Keywords: Crude oil, OPEC, Fair price, Market price, Event study, Autoregressive Distributed Lag (ADL)

JEL Classification: E31, Q4, G140

Suggested Citation

Brunetti, Celso and Buyuksahin, Bahattin and Robe, Michel A. and Soneson, Kirsten R., OPEC 'Fair Price' Pronouncements and the Market Price of Crude Oil (November 15, 2012). Energy Journal, Vol. 34, No. 4, 2013, Available at SSRN: https://ssrn.com/abstract=2176296

Celso Brunetti

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Bahattin Buyuksahin

CoMeX Consulting and Advising ( email )

Washington, DC
United States
2022904253 (Phone)

Michel A. Robe (Contact Author)

University of Illinois at Urbana-Champaign ( email )

601 E John St
Champaign, IL 61820
United States

Kirsten R. Soneson

Commodity Futures Trading Commission (CFTC) ( email )

1155 21st Street NW
Washington, DC 20581
United States
202-418-5304 (Phone)

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