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Physical market determinants of the price of crude oil and the market premium

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  • Chevillon, Guillaume
  • Rifflart, Christine

Abstract

We analyze the determinants of the real price of crude oil by means of an equilibrium correction model over the last two decades where we focus on the aspects of the physical market that impact on the clearing price. We find that two cointegrating relations affect the changes in prices: one refers to OPEC's behavior, attempting to control prices using its market power and quotas; the other to the coverage rate of OECD expected future demand using inventory behaviors. We derive a forecasting equation for the change in oil prices which we use to assess the speculative elements of the price increases of the period 2000-05. We show that worries alien to the physical markets were the causes of the increase in oil prices and we quantify their overall impact.

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Bibliographic Info

Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 31 (2009)
Issue (Month): 4 (July)
Pages: 537-549

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Handle: RePEc:eee:eneeco:v:31:y:2009:i:4:p:537-549

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Web page: http://www.elsevier.com/locate/eneco

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Keywords: Oil price Market premium Forecasting Cointegration;

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Cited by:
  1. repec:wyi:wpaper:002040 is not listed on IDEAS
  2. Vansteenkiste, Isabel, 2011. "What is driving oil futures prices? Fundamentals versus speculation," Working Paper Series 1371, European Central Bank.
  3. Kolodzeij, Marek & Kaufmann, Robert.K., 2014. "Oil demand shocks reconsidered: A cointegrated vector autoregression," Energy Economics, Elsevier, vol. 41(C), pages 33-40.
  4. Koop, Gary & Tole, Lise, 2013. "Modeling the relationship between European carbon permits and certified emission reductions," Journal of Empirical Finance, Elsevier, vol. 24(C), pages 166-181.
  5. Ellen, Saskia ter & Zwinkels, Remco C.J., 2010. "Oil price dynamics: A behavioral finance approach with heterogeneous agents," Energy Economics, Elsevier, vol. 32(6), pages 1427-1434, November.
  6. Chevallier, Julien & Aboura, Sofiane, 2013. "Leverage vs. Feedback: Which Effect Drives the Oil Market ?," Economics Papers from University Paris Dauphine 123456789/9860, Paris Dauphine University.
  7. Claudio Dicembrino & Pasquale Lucio Scandizzo, 2012. "The Fundamental and Speculative Components of the Oil Spot Price: A Real Option Value Approach," CEIS Research Paper 229, Tor Vergata University, CEIS, revised 18 Apr 2012.
  8. Jakobsson, Kristofer & Söderbergh, Bengt & Snowden, Simon & Li, Chuan-Zhong & Aleklett, Kjell, 2012. "Oil exploration and perceptions of scarcity: The fallacy of early success," Energy Economics, Elsevier, vol. 34(4), pages 1226-1233.
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  12. Kaufmann, Robert K., 2011. "The role of market fundamentals and speculation in recent price changes for crude oil," Energy Policy, Elsevier, vol. 39(1), pages 105-115, January.
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