Unraveling the structural sources of oil production and their impact on CO2 emissions

In this study, we examine the structural short- and long-run effects of oil supply and demand shocks on the production of crude oil. Among these, oil supply shocks are the major determinant of oil production. Furthermore, we adopt local projections to elicit that oil supply and aggregate demand shocks are significant drivers of CO2 emissions, whereas oil-specific demand shocks have only limited impact on overall emissions in the short-, mid-, and long-term. These findings underscore the limitations of current demand-side policies within a selected group of countries, emphasizing the necessity for global support and binding commitments to effectively reduce emissions from oil production and meet the climate targets set by the Paris Agreement in 2015.