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Future World Oil Prices and Production Levels: A Comment

In a recent paper published in this journal, Marsballa and Nesbitt (1986) present an economist's point of view of OPEC pricing. In particular, they compute profit maximizing price strategies using a dynamic representation of the world oil market. The purpose of this paper is not to dispute the calculated numbers but to question the qualitative validity of the calculated optimal paths. The claim of this note is that it is very unlikely to generate smooth paths -- e.g. the price strategies shown in their paper -- the presented framework.

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

JEL Codes: Q38: Nonrenewable Resources and Conservation: Government Policy, Q31: Nonrenewable Resources and Conservation: Demand and Supply; Prices, L71: Mining, Extraction, and Refining: Hydrocarbon Fuels, Q41: Energy: Demand and Supply; Prices, D42: Market Structure, Pricing, and Design: Monopoly, Q48: Energy: Government Policy, D40: Market Structure, Pricing, and Design: General

Keywords: OPEC pricing, World oil prices, Optimal price policy

DOI: 10.5547/ISSN0195-6574-EJ-Vol11-No3-7

Published in Volume 11, Number 3 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.


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