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World Oil Price Increases: Sources and Solutions

World oil prices have been high since 1973, compared to average production costs and historical norms, because the Organization of Petroleum Exporting Countries (OPEC) has functioned as a viable price-setting and output-restricting institution. Prices increased sharply in 1973-1974 and 1979, and in each case OPEC validated the higher price levels by subsequently cutting production. On the other hand, the importing countries have failed to establish institutions of their own that could mitigate price increases because they have not perceived the problem to be one of institutional control over prices. Instead, they have tended to view high oil prices as the result of resource scarcity. Their responses have been predominantly intermediate to long term, stockpiling for an embargo, encouraging conservation, and promoting the development of alternative energy

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

JEL Codes: Q02: Commodity Markets, Q38: Nonrenewable Resources and Conservation: Government Policy, Q42: Alternative Energy Sources, Q47: Energy Forecasting, Q35: Hydrocarbon Resources, L71: Mining, Extraction, and Refining: Hydrocarbon Fuels

Keywords: World oil market, oil price spikes, Economic analysis

DOI: 10.5547/ISSN0195-6574-EJ-Vol1-No4-4

Published in Volume 1, Number 4 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.


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