Redes de colaboración: una nueva perspectiva del desarrollo científico

The complexity of the oil prices is often explained in the context of “oil” being a non-renewable and exhaustible resource (see Hotelling, 1931). In economic theory, the price of a commodity is usually defined as the marginal cost of that commodity for an ordinary competitive market. However, one unique nature of the price for exhaustible resources is that it is often higher than its marginal cost when compared with other commodities (Hamilton, 2012). Oil market is often described as a very complex institution dominated by politics.

The increasing oil prices which appear to be affecting or affected by other energy prices have been of increasing concern to various stakeholders ranging from consumers, analysts, international institutions and governments as well as the media (see Marimoutou et al., 2006). This leads to adoption of various complex approaches to its study. Modelling the global oil market would mean how decisions of various stakeholders or market agents (such as OPEC, non-OPEC, oil consumers) are modelled by the modeller (Powell, 1990).

Furthermore, the literature on the oil market modelling is divided into two broad categories, namely: optimisation and simulation (Powell, 1990;

Baldwin and Prosser, 1988) although subsequent studies (see Cremer and Salehi-Isfahani, 1991; Alhajji and Huettner, 2000a) view the models from monopolistic and competitive perspectives (see Al-Qahtani et al., 2008b).

Each modelling approach is guided by certain assumptions. Proponents of the optimisation approach to modelling oil market suggest an ideal situation where the intention of the decision-makers is a wealth optimisation over time

70

(Powell, 1990). Although, optimisation or inter-temporal optimisation modelling of oil markets (as suggested in Baldwin and Prosser, 1988) considers the extreme interest of a market player or set of players, there is no consideration of the social aspect of the markets in the most previous literature. Therefore, they suffered some degree of criticisms for being model-driven studies with many tendencies of arriving at wrong conclusions (see Smith, 2005).

In the same way, simulation models have been widely applied or tested in the oil market with a fundamental assumption that players are behaving competitively and/or operating towards a particular target price and take action to set a price path which is influenced by others depending on market developments (see Gately, 1984; Baldwin and Prosser, 1988; Al-Qahtani et al., 2008b). In other words, the second approach assumes a partial monopolistic set up. However, both approaches do not appear to be satisfactorily comprehensive in describing the events in the oil markets and the role of OPEC in influencing oil prices (see Slaibi et al., 2010). In this regard, Slaibi et al. (2010) proposed a framework considered cooperative as it encompassed the role of political and military influences connected with economic motives of both oil producers and consumers to keep price definition within a target zone. The econometric modelling of oil markets and prices based on Slaibi et al. (2010)’s approach has some degree of flexibility in the theoretical propositions. On this basis, the dynamic behaviour of the market players can best be described.

Oil price volatility has become a global concern given its effects on the macroeconomics of both developed and developing nations across centuries (Darby, 1982 and Hamilton, 1996, 2003, 2009 and Carlstrom and Fuerst, 2005). Oil, being one of the most important resources on the planet, has made the industry not only the largest but also the most international among other industries (Parra, 2004; Cortese, 2013; Lin, 2011). The opinions on the real causes of oil price volatility are divided across researchers and oil market analysts as much as opinions on the role of OPEC. The internationalisation of the oil companies and their approach to handling events that relate to environment, prices and technology transfer have been widely studied and debated from different perspectives and disciplines, which raise important

71

questions such as: Why oil and how does it influence power? Why are the oil prices volatile? How does the balance of power change over time? What are oil price volatility receiving important concerns to the market participants?

Historically, shifts in the balance of power in the oil markets have been established over time and from one player to another (see Fattouh, 2012;

Russell and Ibrahim, 2013). Initially, during the early discovery periods of oil in the 1870s, the power of pricing was mainly determined by the market forces informed by demand and increased desire to produce more oil found in large quantities relative to the then-existing demands (see Hamilton, 2011).

In the later periods when demand for high-related investments increased, the power to fix oil prices mostly moved to the hands of the major oil companies which provided the capital because the nature of the companies in those days did not accord much regards to any other parties apart from concern over the shareholders' wealth (see Parra, 2004; Chalabi, 2010). Yang et al. (2002) considered the demand side of the oil market to the OPEC supply using error correction models and simulation analysis in the light of the shift in demand and recession.

Furthermore, Marimoutou et al. (2006) showed inevitable connection between the sensitivity of oil prices and negative volatility and protective measures against market risk. In this regard, assuming such actions might pose a high risk to market players, their study applied both conditional and unconventional Extreme Value Theory (EVT) in assessing the risk-management strategies within the concept of Value at Risk (VaR) in the oil market. Over the last four decades, a growing literature has been well documented on the global oil market. More than thirty (30) models on the oil market were made publicly known by the Energy Modelling Forum (EMF) in the late 1970s alone (Powel, 1990). Jaffee and Soligo (2007) in their review of events and the role of the IOCs in the transformation of the international market found that oil markets are highly competitive. In all the OPEC nations, production of oil is largely carried out by the IOCs in partnership with the national oil companies. In the recent Forbes analysis of the top twenty five oil companies (i.e. both national and private international) based on their daily production capacity, national companies belonging to OPEC are competing

72

hand-in-hand with the national and privately-owned companies in the non-OPEC nations. Table 3.1 presents a summary of this ranking.

Table 3:1: Forbes Ranking of the World's Biggest Oil Companies The World's 25 Biggest Oil Companies

Based on Daily Production Capacity

6 British Petroleum (BP) - OECD (United

Kingdom) 4.1

7 Royal Dutch Shell - OECD (Netherlands) 3.9

8 Pemex - OECD (Mexico) 3.6

9 Chevron - OECD (USA) 3.5

10 Kuwait Petroleum Corp. - OPEC (Kuwait) 3.2 11 Abu Dhabi National Oil Co. - OPEC (UAE) 2.9

22 Petroleos de Venezuela - OPEC (Venezuela) 1.9

23 Sinopec - Non-OPEC (China) 1.6

24 Nigerian National Petroleum - OPEC (Nigeria) 1.4 25 Petronas - Non-OPEC (Malaysia) 1.4 Total Contribution per 25 Biggest

Companies 89.5

Approximate Daily Global Average Oil

Production 90

Percentage Contribution of the World's

Biggest 25 to World Oil Production 99.44%

Source: Forbes, 2013

Note: 2012 working interest production volumes calculated by Wood Mackenzie reflects oil plus the energy equivalent in natural gas.

73

In this regard, OPEC, non-OPEC and the OECD are summarised in table 3.2.

Table 3:2: Classification of the World's 25 Biggest Oil Companies Based on Country Group

Classification of the World's 25 Biggest Oil

Companies Based on Country Group OPEC

Non-OPEC OECD

Ranking Corporations (National and International) Million barrels

6 British Petroleum (BP) - OECD (United

Kingdom) 4.1

22 Petroleos de Venezuela - OPEC

(Venezuela) 1.9

23 Sinopec - Non-OPEC (China) 1.6

24 Nigerian National Petroleum - OPEC

(Nigeria) 1.4

25 Petronas - Non-OPEC (Malaysia) 1.4 Average Daily Production (ADP) in Million

Barrels per Country Group 38.3 21.9 29.3

Percentage of ADP in Million Barrels per

Country Group 42.79% 24.47% 32.74%

Number of Corporations in Each Country

Group 10 6 9

Source: Forbes, 2013

74

According to the International Energy Agency (IEA) data, approximately 89 million barrels of oil and liquid fuels were produced and consumed per day globally in 2012. This is equivalent to around 32 billion barrels per annum.

Non-OPEC production based on table 3.2 is nearly 60% despite the fact that they hold almost 1/4^th of the global proved oil reserves. This has been consistently similar to the practice a decade ago (see Farrell et al., 2001).

Although, OPEC has recorded a significant increase in its proved reserves over the last couple of decades, non-OPEC countries such as Canada, Norway and Russia have made huge discoveries in the conventional oil and gas which make them become important players in the market (see Farrell et al., 2001;

Chalabi, 2010; and Russell and Ibrahim, 2013). Consumptions of the nations based on country-groups are presented in table 3.3

Table 3:3: Comparison of World Production and Consumption per Country Group

Percentage Production Contribution to World Production Per Country

Consumption Per Country Group 9.37% 39.12% 51.51

%

75

From Table 3.3, it can be observed that OPEC members consume less than 10% of the world oil production. Given the level of the OPEC consumption and corruption in the world corruption perception index, it can be argued that higher sales of oil beyond the current level by OPEC are likely to promote further corruption. It should be noted that non-disclosure of reserve figures relating to shale energy might have a potential impact on toil prices.

Furthermore, recent development in the shale reserves is contributing to additional debates about the role of the new source of energy on the oil prices. Table 3.4 presents summary of the top ten countries in terms of shale oil and gas reserves from EIA data.

Table 3:4: Ranking of Countries According to Shale Reserves Rankings in shale countries; the only OPEC country in the list is Algeria.