Most estimates of the own-price elasticity of demand for oil suggest that it is inelastic.

Read the attached Globe and Mail article on OPEC: "OPEC Posts a Terrific Year". Does the evidence given in the article confirm that the global demand for oil is price inelastic?

OPEC Posts ‘A Terrific Year’: Analysts Estimate Petroleum Exporters Made $140-Billion (U.S.) In 1991 Associated Press The Globe and Mail, 1992 BRUSSELS — Petroleum exporting nations raked in nearly $140-billion (U.S.) from oil exports in 1991 down only slightly from the hefty sum earned a year earlier when prices soared during the Persian Gulf crisis, analysts estimate. “For OPEC, it was a good year," said Peter Bogin, associate director of oil markets at Cambridge Energy Research Associates in Paris. And Peter Gignoux, director of the international energy department at Lehman Brothers in London, said the Organization for Petroleum Exporting Countries can view 1991 as “a terrific year.” Saudi Arabia, the world's largest crude exporter, gained even more money from its oil sales last year than in 1990 when prices shot up after the Iraqi invasion of Kuwait. Mr. Bogin estimates the value of Saudi Arabia's petroleum exports at $47.7-billion in 1991. In its issue scheduled for release today, Petrostrategies, a Paris-based oil newsletter, but Saudi Arabia's earnings even higher at $48.7-billion. The Saudis made $39.7-billion from oil sales in 1990, according to Figures from the 13-nation OPEC. Analysts said Saudi Arabia will likely use the extra money earned last year to help cover expenses incurred during the gulf crisis when U.S. troops were stationed on its soil. The kingdom has kept its production high since shortly after Iraq invaded Kuwait in August 1990, to help offset the loss of crude stemming from a United Nations boycott of oil from Iraq and Kuwait. Saudi Arabia produced an average of 8.2 million barrels a day last year, up from 6.3 million barrels daily in 1990, Mr. Bogin said. "They were in the best position to take advantage of Iraq and Kuwait being out of the picture," he said. In all, Mr. Bogin estimated the OPEC producers gained $139.8-billion in 1991. Petrostrategies tallied up earnings of $139.1-billion

OPEC's calculations will not be ready until late in the year. The value of OPEC's oil exports was $147.4-billion in 1990, the highest since 1983 when the cartel said it toted up sales of $156.9-billion. OPEC earnings were a record $284.5-billion in 1980. The gulf crisis initially sent oil prices climbing because of worries that an outbreak of war in the region would disrupt the flow of crude to world markets. That helped push the average price of a basket of crudes monitored by OPEC to $22.26 a barrel in 1990, but prices slid to an average of $18.65 last year. The group's stated target price is $21. Even though the gulf war ended early last year, OPEC has maintained a free-for-all production policy, allowing members to pump as much oil as possible. "Higher production in 1991 enabled most OPEC member countries to limit the impact of lower oil prices," Petrostrategies said. The big losers in last year's earnings race were Iraq and Kuwait. Mr. Bogin chalked up no sales for Iraq. The once-mighty producer gained $14.5-billion in 1989. Iraqi oil has remained under embargo by international sanctions. Even though the United Nations has agreed to allow the sale of $1.6-billion worth of Iraqi oil for food and other humanitarian aid, Baghdad has said the plan has too many unfair conditions attached. Kuwait, its oil industry in tatters after the gulf fighting, resumed exports of its oil only last fall. Petrostrategies placed the value of its meager 1991 sales at $600-million, well off its profit of $9.3-billion in 1989. Analysts estimated Iran gained $15-billion to$15.5-billion last year, while Venezuela captured $13.8-billion to $14.5-billion. The United Arab Emirates had sales of $16-billion to $16.8-billion; Nigeria about $12-billion, and Indonesia $7.6-billion, according to the estimates. Other estimates were: Libya $10.1-billion to $10.5-billion; Algeria about $9-billion; Ecuador $1.3-billion; Gabon about $1.6-billion; and Qatar about $2.7-billion.

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Ans Price elasticity of demand is a measurement of the change in consumption of a product in relation to a change in its price Price Elasticity of Dem... View the full answer