IDEAS home Printed from https://ideas.repec.org/a/sae/enejou/v22y2001i4p1-27.html
   My bibliography  Save this article

How Plausible is the Consensus Projection of Oil Below $25 and Persian Gulf Oil Capacity and Output Doubling by 2020?

Author

Listed:
  • Dermot Gately

Abstract

A two-part consensus in three recent long-term projections of the world oil market states: oil's price will stay below $25 (1999 $/barrel), and OPEC oil capacity and production will increase rapidly over the next two decades to unprecedented levels, more than doubling in the Persian Gulf by 2020. Such are the projections by the International Energy Agency (IEA), by the Energy Information Administration of the U.S. Department of Energy (DOE), and in The New Economy of Oil by John Mitchell and others. Yet such projections are not based on behavioral analysis of Gulf countries' decisions; they are merely the calculated residual demand for OPEC oil, the difference between projected world oil demand and non-OPEC supply, given some assumed price-path. Such projections by IEA and DOE are implausible because they rely on supply behavior by Gulf producers that is not in their own self-interest. The DOE projections of world oil prices could be reasonable, but only if world oil demand and/or non-OPEC supply are much more price-responsive than are represented in their numerical projections. Using an updated version of the model from Gately (1995), I show that the effect of greater price-responsiveness is to make faster output growth - not higher prices - the reliable path to higher OPEC revenue. I also demonstrate the effects of uncertainty about several key parameters (such as price and income elasticities) upon model results when parameter values are randomly sampled 500 times.

Suggested Citation

  • Dermot Gately, 2001. "How Plausible is the Consensus Projection of Oil Below $25 and Persian Gulf Oil Capacity and Output Doubling by 2020?," The Energy Journal, , vol. 22(4), pages 1-27, October.
    • Handle: RePEc:sae:enejou:v:22:y:2001:i:4:p:1-27
    DOI: 10.5547/ISSN0195-6574-EJ-Vol22-No4-1
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.5547/ISSN0195-6574-EJ-Vol22-No4-1
    Download Restriction: no
    File URL: https://libkey.io/10.5547/ISSN0195-6574-EJ-Vol22-No4-1?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:enejou:v:22:y:2001:i:4:p:1-27. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.