The Historical and Variance Decomposition for Oil Price, Oil Consumption, OPEC and Non-OPEC Oil Production

Azami, Somayeh; Fattahi, Shahram; Rezaei, Mehdi

doi:10.22059/ier.2017.62938

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	The Historical and Variance Decomposition for Oil Price, Oil Consumption, OPEC and Non-OPEC Oil Production
Article 4, Volume 21, Issue 3, Summer 2017, Page 519-541 PDF (1023.77 K)
DOI: 10.22059/ier.2017.62938
Authors
Somayeh Azami^* ; Shahram Fattahi; Mehdi Rezaei
Department of Economics, Faculty of Social Science and Education, Razi University, Kermanshah, Iran
Abstract
Abstract In this paper, the behavior of the real oil price and OPEC and non-OPEC oil production during 1973-2013 are modelled. Interactions among OPEC, non-OPEC oil production, global oil consumption, and the real price of crude oil are estimated using a Structural VAR model (SVAR). After providing evidence for the structural breaks in oil price in 1996, the results indicate that, according to variance decomposition analysis, during the two periods of 1996-1973 and 2013-1997, OPEC oil production responded significantly to positive shocks of global oil consumption and non-OPEC oil production responded significantly to shocks of OPEC oil production. During the OPEC era (1973-1996), real oil price responded significantly to positive shocks of OPEC oil production and during the new industrial age (1997-2013) responded significantly to positive shocks of global oil consumption. According to historical decomposition, the cumulative effects of structural shocks of non-OPEC oil production and price on OPEC oil production are greater than the cumulative effects of structural shocks of OPEC oil production and real oil price on non-OPEC oil production .Also, cumulative effects of structural shocks of OPEC oil production on real oil price are greater than cumulative effect of structural shocks of non-OPEC oil production on real oil price.
Keywords
Keywords: OPEC Oil Production; Non-OPEC Oil Production; Global Oil Consumption; Oil Price. JEL Classification: Q43; E32; E31


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The Historical and Variance Decomposition for Oil Price, Oil Consumption, OPEC and Non-OPEC Oil Production

Hamilton, J. D. (2013). Historical Oil Shocks. In R. E. Parker, R. M. Whaples (Eds.), Routledge Handbook of Major Events in Economic History. New York: Routledge Taylor and Francis Group.