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Does OPEC act as a Residual Producer?

Bandyopadhyay, Kaushik Ranjan (2009): Does OPEC act as a Residual Producer?

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Abstract

In the conventional energy modeling systems, such as the one followed by the National Energy Modeling System (NEMS), USA or the International Energy Agency (IEA), Paris, the OPEC has been assumed to act like a residual producer. Notwithstanding such assumptions in the aforesaid models, the OPEC’s role just as a residual producer still continues to remain an open question. It deserves to be recognised that the OPEC is not a homogeneous entity but consists of producers with diverse proven reserve positions and hence diverse interests and expectations. So, it would be rather naive to expect that the OPEC as a whole would necessarily comply with the call without taking into account the interests of its member countries. Taking cue from above, a model of world crude demand and Non-OPEC crude supply has been constructed in the paper to cross-examine whether the assumption of the conventional modeling approaches regarding the OPEC’s role as a residual producer actually holds good in practice.

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