Financial market pressure, tacit collusion and oil price formation
We explore a hypothesis that a change in investment behaviour among international oil companies (IOC) towards the end of the 1990s had long-lived effects on OPEC strategies, and on oil price formation. Coordinated investment constraints were imposed on the IOCs through financial market pressures for improved short-term profitability in the wake of the Asian economic crisis. A partial equilibrium model for the global oil market is applied to compare the effects of these tacitly collusive capital constraints on oil supply with an alternative characterised by industrial stability. Our results suggest that even temporary economic and financial shocks may have a long-term impact on oil price formation.
Year of publication: |
2010
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Authors: | Aune, Finn Roar ; Mohn, Klaus ; Osmundsen, Petter ; Rosendahl, Knut Einar |
Published in: |
Energy Economics. - Elsevier, ISSN 0140-9883. - Vol. 32.2010, 2, p. 389-398
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Publisher: |
Elsevier |
Keywords: | Investment behaviour Market power Oil market Tacit collusion |
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