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Understanding Crude Oil Prices

Abstract:
This paper examines the factors responsible for changes in crude oil prices. The paper reviews the statistical behavior of oil prices, relates this to the predictions of theory, and looks in detail at key features of petroleum demand and supply. Topics discussed include the role of commodity speculation, OPEC, and resource depletion. The paper concludes that although scarcity rent made a negligible contribution to the price of oil in 1997, it could now begin to play a role.

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Energy Specializations: Petroleum – Markets and Prices for Crude Oil and Products; Petroleum – Policy and Regulation

JEL Codes:
L13 - Oligopoly and Other Imperfect Markets
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General

Keywords: Oil prices, commodity speculation, OPEC, resource depletion, oil demand and supply

DOI: 10.5547/ISSN0195-6574-EJ-Vol30-No2-9


Published in Volume 30, Number 2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.