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Comment on "Optimal Oil Producer Behavior Considering Macrofeedbacks"

Abstract:
Harry Saunders's paper on the above subject in this issue of the Journal raises a very interesting point. As is well known, oil-exporting countries now hold major assets in the Western economies. Furthermore, the sensitivity of these economies to abrupt changes in oil prices seems widely accepted. It then seems reasonable to expect oil exporters' pricing decisions to be influenced by concerns about the rate of return on their assets. In particular, Saunders argues that oil exporters would want to avoid abrupt price changes because the ensuing shock effects would tend to reduce the rate of return on capital.

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Energy Specializations: Petroleum – Markets and Prices for Crude Oil and Products; Energy Modeling – Energy Data, Modeling, and Policy Analysis

JEL Codes: Q37: Nonrenewable Resources and Conservation: Issues in International Trade, Q41: Energy: Demand and Supply; Prices, Q31: Nonrenewable Resources and Conservation: Demand and Supply; Prices, Q43: Energy and the Macroeconomy

Keywords: Oil exporting countries, Oil price shocks, rate of return on capital

DOI: 10.5547/ISSN0195-6574-EJ-Vol4-No4-2


Published in Volume 4, Number 4 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.