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What are the Causes of High Crude Oil Price? Causality Investigation

Author

Listed:
  • Saleh Mothana Obadi

    (Institute of Economic Research, Slovak Academy of Sciences, Slovakia)

  • Sona Othmanov

    (Ph.D. Student at the Faculty of Commerce, University of Economics in Bratislava, Slovakia)

  • Mariam Abdov

    (Ph.D. Student at the Faculty of Commerce, University of Economics in Bratislava)

Abstract

This paper examines the development of oil prices and identifies the main causes of their development in the last three decades. Of course there are many factors influencing the oil prices, predictable market factors (such as demand and supply) and unpredictable factors (such as political and social turmoil). Therefore, this paper will empirically try to identifying the main causes of movement of the oil prices. This paper also has an ambition to test relation between crude oil and natural gas prices, as substitutes, and the role of decline of natural gas prices in stabilization or destabilization the crude oil market. We have had used in this paper qualitative and quantitative methods such as regression model, Granger causality and structural models. The main findings we have gotten are that the US dollar exchange rate has a significant role in the development of oil prices. We think that the decline in natural gas (as a substitute) prices in the last two years has a slightly impact on stabilization of the oil prices.

Suggested Citation

  • Saleh Mothana Obadi & Sona Othmanov & Mariam Abdov, 2013. "What are the Causes of High Crude Oil Price? Causality Investigation," International Journal of Energy Economics and Policy, Econjournals, vol. 3(Special), pages 80-92.
    • Handle: RePEc:eco:journ2:2013-04-10
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    References listed on IDEAS

    as
    1. Hamilton, James D., 1996. "This is what happened to the oil price-macroeconomy relationship," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 215-220, October.
    2. Michael Ye & John Zyren & Joanne Shore & Michael Burdette, 2005. "Regional Comparisons, Spatial Aggregation, and Asymmetry of Price Pass-Through in U.S. Gasoline Markets," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 33(2), pages 179-192, June.
    3. Benassy-Quere, Agnes & Mignon, Valerie & Penot, Alexis, 2007. "China and the relationship between the oil price and the dollar," Energy Policy, Elsevier, vol. 35(11), pages 5795-5805, November.
    4. Amano, R. A. & van Norden, S., 1998. "Oil prices and the rise and fall of the US real exchange rate," Journal of International Money and Finance, Elsevier, vol. 17(2), pages 299-316, April.
    5. Kiseok Lee & Shawn Ni & Ronald A. Ratti, 1995. "Oil Shocks and the Macroeconomy: The Role of Price Variability," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 39-56.
    6. Yousefi, Ayoub & Wirjanto, Tony S., 2004. "The empirical role of the exchange rate on the crude-oil price formation," Energy Economics, Elsevier, vol. 26(5), pages 783-799, September.
    7. Mr. Noureddine Krichene, 2005. "A Simultaneous Equations Model for World Crude Oil and Natural Gas Markets," IMF Working Papers 2005/032, International Monetary Fund.
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    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Chris Jeffords & Alexi Thompson & David Yerger, 2015. "Employment Booms and Busts Stemming from Nonrenewable Resource Extraction," International Journal of Energy Economics and Policy, Econjournals, vol. 5(3), pages 809-815.

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    More about this item

    Keywords

    Crude oil prices; natural gas prices; US dollar exchange rate; granger causality; structural model;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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