Effects Of The Seven Sisters Actions Outlined

1289 WordsNov 30, 20156 Pages
The key feauture of the seven sisters actions outlined above was their attempts to reduce their tax liabilities, in a time where the people of the Middle East were calling for nationalisation and equity participation by the governments of the oil producing countires. This lead to the creation of the Organisation of the Petroleum Exporting Countries (OPEC) in Baghdad, 1960. Their initial aim was to ensure the security of their tax revenues from the International Oil Companies. This can be seen as the creation of a cartel in order to counter the oligoponistic power of buyers. In the previous time periods discussed its hard to formally prove that structural change has taken place in a quantative way. The oil shocks of 1973 and 1979 provide our best opportunity to definitely prove structural change has taken place in the time series data of oil prices. This is where we will start before moving onto modeling the behaviour of OPEC during this time and discussing their role in the shocks. Using an Auto Regressive model based on Pindyck (1999) on data from 1885 – 1968, taken from the BP statistical review, we can attempt to explain the price of oil through its own lagged price. We report an R-squared value of 0.82 (suggesting 82% of the data is explained in the model), whilst the drawbacks of reporting R-sqaured values are well established this is still a useful proxy for determining the success of the model. It should be noted that all data values are logged to detrend the data
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