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Prospects for a Tighter World Oil Market

Edward W. Erickson

Year: 1985
Volume: Volume 6
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol6-No1-1
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Abstract:
Once again, the world oil market has failed to behave according to expectation. This time, the predictions of sharp price drops did not materialize-nor did previous forecasts of continuing escalation. This ongoing divergence between expectations and reality is becoming standard-as is the remarkable resiliency in the position and behavior of Saudi Arabia.



Forecasting the Demand for Electricity in Saudi Arabia

Mohammed A. Al-Sahlawi

Year: 1990
Volume: Volume 11
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol11-No1-10
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Abstract:
Electric power in Saudi Arabia is an essential tool for modern economic development. Thus, forecasting electricity demand is vital for planning and investment purposes. In estimating future electricity demand, it is important to assure high responsibility that there will be no supply shortages. Nonparametric analysis techniques like bootstrap, the jackknife, and cross-validation are becoming increasingly popular in the estimation of probability density function of a variable or its function (see Efron (1979) and Efron and Gong (1983)).



The Target Revenue Model and the World Oil Market: Empirical Evidence from 1971 to 1994

A.F. Alhajji and David Huettner

Year: 2000
Volume: Volume21
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol21-No2-6
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Abstract:
This study draws on other studies that concluded OPEC is not a cartel and Saudi Arabia acts as a dominant producer in the world oil market. The intention here is to see whether the Target Revenue (TR) model provides an explanation for the behavior of some OPEC members that do not coordinate production with Saudi Arabia. We investigate whether production cuts or increases by OPEC and non OPEC members are based on their investment or budgetary needs. By retesting the TR model, we show that investment and budgetary needs do not affect the production of oil in free-market economies (OPEC and non-OPEC), but they do affect production decisions of the more centrally-planned, isolated and oil dependent economies. Existing studies in the literature have conceptual and statistical limitations that justify retesting the model. This study is the first to investigate the TR model in a separate study and to compare the results of static and dynamic models. It is also the first to examine the relationship between the degree of economic freedom and the Target Revenue model and to note the TR model is stable when used for countries that are price takers.



The Impact of the Fracking Boom on Arab Oil Producers

Lutz Kilian

Year: 2017
Volume: Volume 38
Number: Number 6
DOI: 10.5547/01956574.38.6.lkil
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Abstract:
This article makes four contributions. First, it investigates the extent to which the U.S. fracking boom has caused Arab oil exports to decline since late 2008. Second, the article quantifies for the first time by how much the U.S. fracking boom has lowered the global price of oil. Using a novel econometric methodology, it is shown that in mid-2014, for example, the Brent price of crude oil was lower by $10 than it would have been in the absence of the fracking boom. Third, the article provides evidence that the decline in Saudi net foreign assets between mid2014 and August 2015 would have been reduced by 27% in the absence of the fracking boom. Finally, the article discusses the policy choices faced by Saudi Arabia and other Arab oil producers.



Oil Subsidies and Renewable Energy in Saudi Arabia: A General Equilibrium Approach

Jorge Blazquez, Lester C Hunt, and Baltasar Manzano

Year: 2017
Volume: Volume 38
Number: KAPSARC Special Issue
DOI: 10.5547/01956574.38.SI1.jbla
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Abstract:
In 2016, the Kingdom of Saudi Arabia (KSA) announced its Vision 2030 strategic plan incorporating major changes to the economic structure of the country, including an intention to deploy 9.5 GW of renewable energy in an effort to reduce the penetration of oil in the electricity generation system. This paper assesses the macroeconomic impact of such changes in the KSA, coupled with reductions in implicit energy subsidies. Based on a dynamic general equilibrium model, our analysis suggests that if the KSA government were to deploy a relatively small quantity of renewable technology, consistent with the country's Vision 2030 plans, there would be a positive impact on the KSA's long run GDP and on households' welfare. However, we demonstrate that if the integration costs of renewable technology were high, then households' welfare would be maximized at around 30-40% renewables penetration. In addition, we show that a policy favoring renewable energy would increase the dependence of the KSA on oil, given that a larger share of GDP would be linked to oil exports and so, potentially, to oil price shocks. Finally, it is shown that exporting significantly more oil onto the international market could have a negative impact on the international oil price and thus could offset the potential gains from the renewable energy policy.



Do Foreign Gifts Buy Corporate Political Action? Evidence from the Saudi Crude Discount Program

Jennifer R. Peck

Year: 2021
Volume: Volume 42
Number: Number 3
DOI: 10.5547/01956574.42.3.jpec
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Abstract:
Between 1991 and 2003, Saudi Aramco sold crude to U.S. refineries at a substantial discount, with a total cost of approximately 8.5 billion dollars. This paper assesses the incidence of these discount rents in the U.S. market and yields the first empirical evidence for the use of oil as a tool of political leverage through transfers to American firms. Using panel variation in discount receipts, I find that rents were captured by refiners as profits. Discounts were also associated with increases in refiners� political donations and strategic reallocations of these contributions.



Cooperate or Compete? Insights from Simulating a Global Oil Market with No Residual Supplier

Bertrand Rioux, Abdullah Al Jarboua, Fatih Karanfil, Axel Pierru, Shahd Al Rashed, and Colin Ward

Year: 2022
Volume: Volume 43
Number: Number 2
DOI: 10.5547/01956574.43.2.brio
View Abstract

Abstract:
Structural changes in the oil market, such as the rise of tight oil, are impacting conventional market dynamics and incentives for producers to cooperate. What if OPEC stopped organizing residual production collectively? We develop an equilibrium model to simulate a competitive world oil market from 2020 to 2030. It includes detailed conventional and unconventional oil supplies and financial investment constraints. Our competitive market scenarios indicate that oil prices first decline and tend to recover to reference residual supplier scenario levels by 2030. In a competitive oil market, a reduction in the financial resources made available to the global upstream oil sector leads to increased revenues for low-cost producers such as Saudi Arabia. Compared to the competitive scenario, Saudi Arabia does not benefit from acting alone as a residual supplier, but, under some assumptions, it benefits from being part of a larger group that works collectively as a residual supplier.



Revisiting Energy Subsidy Calculations: A Focus on Saudi Arabia

Anwar A. Gasim and Walid Matar

Year: 2023
Volume: Volume 44
Number: Number 1
DOI: 10.5547/01956574.44.1.agas
View Abstract

Abstract:
The implicit nature of many energy subsidies has led to disagreements over what defines a ‘subsidy' while making it difficult to estimate their indirect fiscal cost. Most energy subsidies in Saudi Arabia are implicit, leading to forgone government revenue. Using a comprehensive dataset, we estimate energy subsidies in Saudi Arabia for ten fuels and electricity for the 2007–2018 period. We begin by applying the price-gap method, then introduce a formulation that better captures the forgone revenues from maintaining a subsidy, accounting for the domestic demand response to the removal of the subsidy, which in turn frees up exports that can reduce the international market price. Our method shows that the magnitude of Saudi Arabia's implicit energy subsidies may be overestimated. For instance, we find that the crude oil subsidy can fall from $8.6 billion (the price-gap estimate) to as low as $3.3 billion in 2018.





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