ENERGY ECONOMICS REVIEW
Year:2009 | Volume:6 | Issue:20|Papers Count:7

The main purpose of this study is to investigate the impact of oil price volatility on gross domestic product (GDP) in Iran for the period of 1987-2006 using seasonal data. We first calculate an index for variability of oil prices using the GARCH model. We then study the relationships amongst variables of the model using vector auto-regression and the long-run relationship amongst the variables using the Johansen-Juselius co-integration method. Based on Impulse Response Functions, variability of oil prices has a negative impact on GDP and leads to lower levels of GDP than would be expected otherwise throughout the study period. The estimated long-run relationships indicate a significant positive impact of private consumption expenditure, investment and net exports on GDP, consistent with the theoretical basis of the study. Total government expenditure, contrary to expectations, has a negative impact on GDP. This result is understandable given the low efficiency of the government sector in Iran and the negative influence of oil price volatility on government expenditures. In the long-run, oil prices have a positive impact on GDP while their volatility has a negative impact. Given the strong dependence of the Iranian economy on oil and oil income, these results are acceptable.

In this paper, we present a simple version of Fleuron's bargaining and enforcement model and show that impatience (as captured in the discount factor) can be a source of bargaining strength. The outcome of the bargaining phase is followed by an enforcement phase that resembles a prisoners’ dilemma. Second, we illustrate how to apply this model to the question of the distribution of benefits within the Organization of Petroleum Exporting Countries (OPEC), particularly with regard to the relationship between bargaining strength and disparate time horizons. We use empirical evidence from OPEC’s fifty year history to test the model.We find countries that discount the future more heavily tend to ask for higher oil production quotas than those that do not. Empirical evidence confirms that OPEC members who are in greater need of oil income are allowed to have higher relative quotas.

One of the important factors that influence the oil market is excess production capacity of OPEC. Excess production capacity is what allows OPEC to effectively intervene in the oil market to control sharp price fluctuations. At times of sudden supply disruptions, OPEC is able to compensate the shortage through raising production closer to capacity. Non-OPEC countries have not followed such a policy and thus it is only OPEC that can intervene to smooth out supply and demand by virtue of its excess production capacity.The insight of this article indicates that any reduction in the excess production capacity of OPEC reduces its ability to stabilize the market in the face of supply and demand shocks. In order to maintain OPEC’s market power it is important that OPEC member countries attract capital and use modern technology to increase their production capacity, thus continuing to have an appropriate level of excess capacity.

Identifying, analyzing and evaluating key factors that influence the global Oil & Gas market have always been main items of discussion amongst scientific circles, technicians and decision takers and policy makers at national and international levels. Optimal methods for assessing these factors are essential challenges for governments, consumers and producers, and national and international companies active in global markets. Groups engaged in market analysis have adopted different approaches to assess market evolution.Given the assumption that all approaches are one-dimensional, the key question is to arrive at an approach that produces valid results for an uncertain and complicated global market. The development of interdisciplinary science and multidimensional studies provide an opportunity for comprehensive and multidimensional modeling for identification of key factors that influence the Oil & Gas global market. This paper uses AHP techniques to quantify the weight of variables that impact supply and demand. The paper then identifies the relative weight of each factor for policy setting and decision making at the macro level. The results indicate that the weight and relative importance of demand and supply variables are different. The study also proposes areas of future research based on initial results obtained.

Although Iran has substantial energy resources, it is a developing country due to sub-optimal use of these resources. Moreover, oil products have a major share in total energy consumption and are mostly consumed by the household sector. Therefore, urgent action is needed for optimizing consumption of oil products in the country. Given that unrealistic pricing of oil products is the main reason for the high level of consumption in the country, introducing realistic prices is a necessity. However, decision making is complicated by different options available for revising prices and the likely impact of higher oil product prices on the inflation rate. This study assesses the inflationary impact of raising oil prices on the CPI (Consumer Price Index) and PPI (Producer Price Index) using the input-output table of 1383 with 56 commodities. The research considers both a onetime increase and increases in a gradual manner. The research shows that a onetime adjustment has such a major inflationary impact that it cannot be implemented. From amongst gradual systems of price increase a linear approach has the least inflationary impact and is thus the optimal approach to be adopted.

In this study, two forms of non-linear energy demand functions are simulated to forecast the future situation of energy demand in Iran (total final energy consumption) by using trend lines of macroeconomic indices. In other words, we study how efficiency of the energy demand estimation in Iran can be improved through use of Particle Swarm Optimization (PSO) algorithm. The PSO-based energy demand Simulation (PSOEDS) model is developed using population gross domestic product and export of goods and services as variables. In this essay, one of the suggested equations is exponential and the other one is quadratic. In energy demand projection, the quadratic form provides better results and can be used for evaluation of energy sector projects in Iran with greater effectiveness.

The transport sector is a major consumer of energy sources, particularly oil products. Two of the reasons for the high consumption of petrol by fuel inefficient passenger cars are the relatively low prices of petrol compared to international prices and the old age of the vehicle fleet. The subsidy paid per liter of fuel in 1386 was 4,394 Rials, which is a significant amount. This paper assesses the cost-benefit of replacing older petrol vehicles under five different scenarios. The first scenario assesses the cost-benefit outcome of retiring older light-duty vehicles without official support for their replacement by new vehicles.  This scheme, while attractive for the government is not viable as it does not recommend any replacement methods. The second, third, fourth and fifth scenarios investigate the replacement of old light duty vehicles with domestic products over a period of five years. According to the overall results, it is understood that in order to support domestic production old light duty vehicles will be replaced by domestic petrol cars such as Peugeot GLX, Peugeot ROA, Pride and Samand. By the end of the fifth year of the scheme where all the old light-duty vehicles have been replaced, fuel consumption would be lower by 7 million liters per day.