Empirical study on world oil price influenced from OPEC output

As the organization of oil exporting countries, OPEC has exerted great influences on the oil price all through. However, as the oil price is soaring after world financial crisis in, 1998, OPEC's ability to manipulate oil price has brought about myriads of debates. To make certain the question, this paper is committed to analyze the dynamic influences of OPEC output on oil price since its rising from 1999. Using two periods' data of 1973-1983 and 1999-2006, this paper built Error Correction Model for OPEC out ut and oil price. Through the comparison between two periods, it is highlighted that OPEC output and the oil price have cointegation and bidirectional Granger causality. The results from Impulse Response Function and Variance Decomposition also point out that OPEC output still has notable impact on oil price in short term, but with lower intensity and time lag.