This paper develops and estimates a model of the American petroleum industry. The model accounts for the storable and exhaustible nature of petroleum as well as the strategic interaction of agents operating in the stochastic environment of the markets for crude and refined petroleum products. The linear rational expectations modelling framework is adopted. The formulation and the econometric specification of the model are motivated by a statistical and vector autoregression analysis of the annual data for the post World War II period. The parameter estimates of the model over that period conform to the model’s restrictions. In addition, the overall fit of the model judged from the usual diagnostic statistics seems to be relatively good. Important findings of this empirical test are: a not too inelastic domestic demand for refined petroleum products; a marginal cost of domestic crude petroleum production that is an increasing function of cumulative production (exhaustibility), evidence of production smoothing inventory behavior; fast inventory adjustment to desired inventory levels; and finally, upward sloping foreign supplies of crude and refined petroleum products.
Weitere Kapitel dieses Buchs durch Wischen aufrufen
- A Linear Rational Expectations Equilibrium Model of the American Petroleum Industry
Sophia P. Dimelis
- Springer US
- Chapter IV