OPEC and Non-OPEC Oil Production and the Global Economy

44 Pages Posted: 6 Nov 2014 Last revised: 15 Mar 2015

See all articles by Ronald A. Ratti

Ronald A. Ratti

Western Sydney University - Department of Economics & Finance

Joaquin Vespignani

University of Tasmania - School of Economics and Finance

Date Written: November 2014

Abstract

Hamilton identifies 1973 to 1996 as “the age of OPEC” and 1997 to the present as “a new industrial age.” During 1974-1996 growth in non-OPEC oil production Granger causes growth in OPEC oil production. OPEC oil production decreases significantly with positive shocks to non-OPEC oil production in the earlier period, but does not do so in the “new industrial age”. In the “new industrial age” OPEC oil production rises significantly with an increase in oil prices, unlike during “the age of OPEC” period. OPEC oil production responds significantly to positive innovations in global GDP throughout. Over 1997:Q1-2012:Q4 the negative effect on real oil price of positive shocks to non-OPEC oil production is larger in absolute value than that of positive shocks to OPEC oil production. The cumulative effects of structural shocks to non-OPEC oil production and to real oil price on OPEC oil production are large. The cumulative effects of structural shocks to OPEC production and real oil price on non-OPEC production are small. Results are robust to changes in model specification. An econometric technique to predict growth in OPEC oil production provides support for the results from the SVAR analysis. Results are consistent with important changes in the global oil market.

Keywords: OPEC production, non-OPEC, oil Price, global oil market

JEL Classification: E31, E32, Q43

Suggested Citation

Ratti, Ronald A. and Vespignani, Joaquin, OPEC and Non-OPEC Oil Production and the Global Economy (November 2014). CAMA Working Paper No. 69/2014, Available at SSRN: https://ssrn.com/abstract=2519297 or http://dx.doi.org/10.2139/ssrn.2519297

Ronald A. Ratti

Western Sydney University - Department of Economics & Finance ( email )

Sydney, NSW 1797
Australia

Joaquin Vespignani (Contact Author)

University of Tasmania - School of Economics and Finance ( email )

Commerce Building,
Sandy Bay Campus
Sandy Bay, TAS, Tasmania 7005
Australia

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