Abstract
With a simple decomposition method, we estimate the monthly shifts in global oil demand and non-OPEC+ supply since 2010. We find evidence that during the January 2017 to December 2023 period, OPEC+ attempted to stabilize the price of crude oil well below the values assessed by market observers. Using a structural model of OPEC+’s behavior, we find that judgmental errors regarding the size of market shocks that OPEC+ attempted to offset significantly increased after the start of the COVID-19 pandemic due to the unprecedented nature and size of those shocks. Despite this, without OPEC+’s actions, the price volatility would have been significantly higher than actual, would have nearly doubled during the pre-pandemic period, and would have been higher by 86% during the pandemic and by 28% during the Ukraine war. Our results also suggest that measures implemented by other countries, such as coordinated releases from national stockpiles of crude oil, reduced price volatility by at least a fifth during the Ukraine war, a factor that OPEC+ appears to have factored into its production plans.
