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Volatility of Oil Prices

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  • Mr. Peter Wickham

Abstract

This paper examines the behavior of crude oil prices since 1980, and in particular the volatility of these prices. The empirical analysis covers “spot” prices for one of the key internationally traded crudes, namely Dated Brent Blend. A GARCH (generalized autoregressive conditional heteroscedastic) model, which allows the conditional variance to be time-variant, is estimated for the period which includes the oil price slump of 1986 and the surge in prices in 1990 as a result of the Iraqi invasion of Kuwait. The paper also discusses the growth of futures and derivative markets and the dynamic links between spot and futures markets.

Suggested Citation

  • Mr. Peter Wickham, 1996. "Volatility of Oil Prices," IMF Working Papers 1996/082, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1996/082
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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=1989
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    Cited by:

    1. Morana, Claudio, 2001. "A semiparametric approach to short-term oil price forecasting," Energy Economics, Elsevier, vol. 23(3), pages 325-338, May.
    2. Chevillon, Guillaume & Rifflart, Christine, 2009. "Physical market determinants of the price of crude oil and the market premium," Energy Economics, Elsevier, vol. 31(4), pages 537-549, July.
    3. Carlos Coimbra & Paulo Soares Esteves, 2004. "Oil price assumptions in macroeconomic forecasts: should we follow futures market expectations?," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 28(2), pages 87-106, June.
    4. Mr. James Daniel, 2001. "Hedging Government Oil Price Risk," IMF Working Papers 2001/185, International Monetary Fund.
    5. Mr. Benedict F. W. Bingham & Mr. James Daniel & Mr. Giulio Federico, 2001. "Domestic Petroleum Price Smoothing in Developing and Transition Countries," IMF Working Papers 2001/075, International Monetary Fund.

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