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A World Equilibrium Model of the Oil Market, Review of Economic Studies

Abstract

We use a new micro data to compile some key facts about the oil market and estimate a structural industry equilibrium model that is consistent with these facts. Our model implies that demand and supply shocks contribute equally to the volatility of oil prices but that the volatility of investment by oil firms is driven mostly by demand shocks. Our model predicts that the advent of fracking will eventually result in a large reduction in oil price volatility.

Type

Article

Author(s)

Sergio Rebelo, Gideon Bornstein, Per Krusell

Date Published

2021

Citations

Rebelo, Sergio, Gideon Bornstein, and Per Krusell. 2021. A World Equilibrium Model of the Oil Market. Review of Economic Studies.

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