Is OPEC a Cartel? Evidence from Cointegration and Causality Tests

The energy shocks of the 1970's had significant effects on the global economy. Were they engineered by an effective cartel of OPEC members acting to share the market by controlling output and influencing market prices? If OPEC was an effective cartel sharing the market among its members, there would be a long-run relationship between each member's individual production and total OPEC output. One would also expect OPEC's production to significantly affect the market price of oil as the organization is often accused of curbing production in order to raise prices. These implications of cartel behavior are tested via cointegration and causality tests. The likely effects of regime changes are dealt with using techniques developed by Perron (1989). There is evidence of output coordination among some members of the organization, especially in the output rationing era (1982-93). This is also the only period in which the causality from OPEC production to the price of oil is statistically significant. Overall, the evidence suggests that OPEC did act as a cartel in the 1980's in order to maintain prices, while it simply took advantage of market conditions in the 1970's and did not have to restrain output.OPEC, oil prices, cointegration, causality tests

Regionalization in the World Crude Oil Market

According to Weiner (1991), the world oil market is said to be unified' if prices for same quality crude oils from different regions of the world move together and regionalized otherwise. This hypothesis of Weiner is kept unchanged. However, we are more interested in the efficiency implications of a regionalized world oil market than its policy implications as discussed by Weiner. Specifically, if these prices deviate from each other, i.e., the market is fragmented, there will be arbitrage opportunities for crude oil traders which would render the market inefficient. In this paper, the regionalization hypothesis is investigated via cointegration tests using both spot and contract prices for fifteen crude oils. Three groups of similar quality crudes are formed based on API gravity and sulfur content. Tests of cross-group co-movement which provided evidence for significant quality differences between heavy and light crudes further supported our groupings. Then the co-movement of prices is tested within each group. The crash in 1986 is explicitly dealt with following methods described in Perron (1989). Results indicate that the world crude oil market is unified over the 1980-95 period.

Is OPEC a Cartel? Evidence from Cointegration and Causality Tests

Were the energy shocks of the 1970s engineered by an effective cartel acting to share the market by controlling output and influencing oil prices? If OPEC was an effective cartel sharing the market among its members, there would be a long run relationship between each member's production and total OPEC output. One would also expect OPECs production to significantly affect the price of oil. These implications of cartel behavior are tested via cointegration and causality tests. The likely effects of regime changes are dealt with using techniques developed by Perron (1989). There is evidence of output coordination among members of the organization, especially in the output rationing era (1982-1993). This is also the only period in which the causality from OPEC production to the price of oil is statistically significant.

Regionalization in the World Crude Oil Market: Further Evidence

This paper extends the tests of Weiner's (1991) regionalization hypothesis in Gillen (1997), which employed monthly data, to weekly data from a more recent period (1991:4-1996:52). The higher frequency data allows us to analyze the co-movement of prices for similar quality crude oils from different regions of the world in shorter periods of time. In addition to the full sample, two subperiods (one of falling prices, 1991:4-93:52 and the other of rising prices, 1994:1 96:52) are analyzed. The results are usually similar to those from Gillen (1997) which rejected regionalization, but the comparison of the two subperiods leads to some interesting conclusions. First, prices (including that of Saudi Arabian Heavy) appear to be more in line with each other during tight market conditions than during weak market conditions. Second, the global benchmark role of WTI and UK Brent is reinforced.

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X, 182 p.online resource

Electricity and natural gas sectors in Korea: synthetical overview and recent developments

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