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Oil Price Forecasting in the 1980s: What Went Wrong?

Abstract:
This paper reviews forecasts of oil prices over the 1980s that were made in 1980. It identifies the sources of errors due to such factors as exogenous GNP assumptions, resource supply conditions outside the cartel, and demand adjustments to price changes. Through 1986, the first two factors account for most of the difference between projected and actual prices. After 1986, misspecification of the demand adjustments becomes a particularly troublesome problem.

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Energy Specializations: Petroleum – Markets and Prices for Crude Oil and Products; Energy Modeling – Forecasting and Market Analysis

JEL Codes:
L13 - Oligopoly and Other Imperfect Markets
D4 -

Keywords: Oil prices, Forecasting, EMF World oil model, OPEC, Non-OPEC supply

DOI: 10.5547/ISSN0195-6574-EJ-Vol15-No2-1


Published in Volume15, Number 2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.