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Herd mentality and oil prices: implications for sustainability

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  • Hosein Piranfar

Abstract

Despite the current volatility (early 2007), oil prices have experienced a persistently upward trend since 2004. By examining the cascading and stochastic models of herding, the paper looks at the role of herding and diminishing resources behind the volatility and rapid rise in oil prices. A main argument here is that the existence of institutional herding is not incompatible with the entry of noise traders; it rather leads and complements them. The paper also shows that persistent rise may in fact encourage sustainable alternative sources of energy to save the pernicious impact of herding, which can always rattle the prices dissuading the investors from investing in alternative energy. The methodology is based on literature review and the relevant data on oil prices.

Suggested Citation

  • Hosein Piranfar, 2010. "Herd mentality and oil prices: implications for sustainability," International Journal of Global Environmental Issues, Inderscience Enterprises Ltd, vol. 10(1/2), pages 194-209.
    • Handle: RePEc:ids:ijgenv:v:10:y:2010:i:1/2:p:194-209
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