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Use of international energy statistic in research. Presentation of an oil market model


Use of international energy statistic in research. Presentation of an oil market model Presentation by Knut Einar Rosendahl Research Department in Statistics Norway – PowerPoint PPT presentation

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Title: Use of international energy statistic in research. Presentation of an oil market model

Use of international energy statistic in
research. Presentation of an oil market model
  • Presentation by Knut Einar Rosendahl Research
    Department in Statistics Norway 1st meeting in
    the Oslo City group on energy statistics 6-8.
    February 2006 Statistics Norway

  • International energy markets are important to
  • Particularly the oil market
  • Affects global economy in general and national
    economies in particular
  • Improved understanding of energy markets helps
    decision makers wrt. investments, policies,
    planning etc.
  • Construction of energy market models may help to
    understand the markets
  • Put together central relationships like demand
    functions for different consumers and supply
    behaviour for different producers into a
    consistent framework
  • Taking into account available reserves and costs
    of production
  • Models will never be completely correct, e.g. due
    to unpredictable behaviour

  • Numerical models need a quantitative basis
  • Based on energy statistics
  • A decent model requires decent statistics
  • The value of a numerical model depends on the
    quality of its data basis
  • Some statistics are more vital than others
  • A numerical model may give valuable insight even
    if (some of) the data are of poor quality
  • International energy statistics of good quality
    are not easily accessible and applicable
  • Different definitions
  • Lack of statistics for several countries
  • Rest of presentation
  • Brief presentation of oil market model and
  • Presentation of energy statistics used and
    problems encountered

FRISBEE a global energy market model
  • FRISBEE is a partial equilibrium model of the
    international energy markets
  • Developed in Statistics Norway over the last 3
  • Partly financed by Norwegian Research Council
  • Emphasis on the oil and gas markets
  • Applications
  • Analysis of OPECs optimal oil price level
  • Analysis of globalisation of gas markets
  • Analysis of various energy and climate policies
    on energy markets
  • Users
  • Mainly own use for research
  • Incl. presentations for e.g. Ministry of Energy,
    Oil companies etc.
  • Several analyses for Statoil

FRISBEE regional classification
Russia, Ukraine Belarus
Western Europe
Eastern Europe
Caspian region
Latin America
Important aspects of the FRISBEE model
  • Production consumption of energy goods in each
  • Free trade on the world market
  • Global equilibrium in each period (exogenous
    stock changes)
  • Time periods 1 year
  • Base year 2000
  • Time horizon Normally 2030
  • More flexibility in the long run
  • Consumption of oil products in each region
  • Three end-users Power production, Industry,
  • Two oil products Transport oil and Oil for
    stationary purposes
  • Depends on end-user prices of different energy
    goods GDP per capita Population Energy
    efficiency (exogenous) Demand in previous period

Important aspects of the FRISBEE model (cont.)
  • Transformation from primary to final energy goods
    is not modelled (fixed add-on in unit costs)
  • Oil production in each region
  • Four field groups (e.g., onshore/offshore)
  • Distinguishes between fields in production,
    undeveloped fields and fields to be discovered
  • Both investment and production decisions are
    treated explicitly
  • Costs are divided into capital costs and
    operating costs
  • Developed fields go through four phases
  • Investment phase pre-peak phase peak phase
    decline phase
  • Oil investments and discoveries
  • At the end of each year oil companies and OPEC
    invest in new fields and improved oil recovery
    (IOR), and discover new fields

Important aspects of the FRISBEE model (cont.)
  • Oil production outside OPEC
  • Production is set so that marginal costs equal
    regional crude oil price (minus gross taxes)
  • Higher costs in the decline phase (before
  • Oil production in OPEC
  • OPEC supplies residual demand for a pre-specified
    oil price target
  • Investments outside OPEC
  • Oil companies consider undeveloped oil fields and
    IOR projects outside OPEC
  • Maximises net present value at discount rate set
    to 10 p.a.
  • Adaptive price expectations based on recent years
    price levels
  • Investments in new fields take time to get on
    stream IOR-investments increase production the
    next year

Important aspects of the FRISBEE model (cont.)
  • Investments in OPEC
  • OPEC invests to maintain a certain excess
  • Investment costs
  • Vary across regions and field groups
  • High risk acts as actual costs
  • Costs increase when remaining reserves decline
  • Technological progress may compensate
  • Short-term costs may increase due to high
    activity level

OPECs optimal oil price level analysis of the
  • What is OPECs optimal oil price level in the
    long run?
  • Discounted income over the period 2005-2030
  • High prices High initial income lower market
    share in the medium term (high Non-OPEC supply
    and low demand)
  • Low prices Low initial income higher market
    share in the medium term
  • Constraint Consider only constant oil prices
    from 2010-2030
  • Implicitly assume that OPEC is a profit
    maximising cartel
  • Ignore internal conflicts or coordination
  • Ignore other considerations for OPEC (e.g.,
    geopolitical issues)
  • OPECs optimal oil price is not a prediction of
    the actual oil price level in 2010-2030

OPECs market share over time for different oil
price levels
OPECs net cash flow over time
OPECs optimal oil price level for different
discount rates (2000-)
Energy statistics used to calibrate the FRISBEE
  • Mostly international statistics
  • Energy demand and production in base year 2000
  • Mainly IEA statistics
  • Good coverage for most countries (incl. Non-OECD)
  • Energy prices in base year
  • Mainly IEA statistics
  • End-user prices of energy goods in
    households/industry/power prod.
  • OECD countries Large variation!
  • Non-OECD countries More or less absent
  • Forced to search elsewhere (research literature
    etc.), and make rough assumptions

Energy statistics used to calibrate the FRISBEE
model (cont.)
  • Energy prices in base year (cont.)
  • Wholesale prices
  • OECD Mostly OK
  • Non-OECD Little information
  • Taxes on energy demand
  • Not focused in this study (so far), but in other
  • Difficult to obtain for several countries and
    energy goods
  • Oil field information (resources, reserves,
    geology, start-up)
  • Access to extensive database with detailed
  • Helped to sort oil reserves into
    developed/undeveloped fields onshore/offshore
    large/small etc.
  • Different opinions exist, especially wrt. size of

Energy statistics used to calibrate the FRISBEE
model (cont.)
  • Production costs
  • Access to information about operating and
    investment costs in different types of fields in
    important countries
  • Used to calibrated cost functions in different
  • Investment, peak phase, decline phase
  • Undiscovered oil resources
  • US Geological Survey (2000) Potential
    discoveries next 30 years
  • Country specific
  • Different opinions exist of course!
  • Used to calibrate deterministic discovery
  • Projections of future economic growth and energy
  • Mainly based on EIA
  • Used to calibrate income elasticities
  • Projections of energy demand vary a lot

Energy statistics important needs
  • More statistics for Non-OECD countries
  • More and more important for the international
    energy markets (e.g. China, Russia)
  • Very limited statistics, especially on prices
  • More available statistics for fossil fuel
  • Important in order to understand the development
    of the energy markets (cf. e.g. the peak oil
  • Very costly today
  • Different definitions about reserves, and
    different evaluations
  • Predominance of unlisted companies
  • Strategic importance for oil companies etc.
  • Statistics on bio resources and other renewables
    also important

More information
  • Aune, Glomsrød, Lindholt and Rosendahl (2005)
    Are high oil prices profitable for OPEC in the
    long run? Discussion Papers 416, Statistics
    Norway (http//
  • E-mail