Oil Prices and the Global Economy

By Rabah Arezki, Zoltan Jakab, Douglas Laxton, Akito Matsumoto, Armen Nurbekyan, Hou Wang, Jiaxiong Yao

January 27, 2017

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Format: Chicago

Rabah Arezki, Zoltan Jakab, Douglas Laxton, Akito Matsumoto, Armen Nurbekyan, Hou Wang, and Jiaxiong Yao. Oil Prices and the Global Economy, (USA: International Monetary Fund, 2017) accessed December 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper presents a simple macroeconomic model of the oil market. The model incorporates features of oil supply such as depletion, endogenous oil exploration and extraction, as well as features of oil demand such as the secular increase in demand from emerging-market economies, usage efficiency, and endogenous demand responses. The model provides, inter alia, a useful analytical framework to explore the effects of: a change in world GDP growth; a change in the efficiency of oil usage; and a change in the supply of oil. Notwithstanding that shale oil production today is more responsive to prices than conventional oil, our analysis suggests that an era of prolonged low oil prices is likely to be followed by a period where oil prices overshoot their long-term upward trend.

Subject: Commodities, Economic sectors, Economic theory, Natural gas sector, Oil, Oil prices, Oil production, Prices, Production, Supply elasticity

Keywords: Consumption efficiency, Cycle, Demand and supply, Demand and supply price elasticity, Depletion, Global, Macroeconomic model, Natural gas sector, Oil, Oil market, Oil price, Oil prices, Oil production, Oil supply, Price incentive, Price of oil, Supply curve, Supply elasticity, Supply shock, Technology, WP

Publication Details

Pages:

30
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2017/015
Stock No:

WPIEA2017015
ISBN:

9781475572360
ISSN:

1018-5941

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