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The effect of OPEC policy decisions on oil and stock prices

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  • Marco G.D. Guidi
  • Alexander Russell
  • Heather Tarbert

Abstract

This paper presents evidence of the effects of OPEC policy decisions on the US and UK stock markets, as well as on oil prices, during periods of conflict and non-conflict from 1986 to 2004. The outcomes of this study are potentially valuable in assessing future strategies for OPEC policy decisions on oil production targets for its Members. This paper also adds to the strong body of evidence supporting the hypothesis that market returns are influenced by factors that affect business conditions, such as oil price shocks. The key findings are that there are asymmetric reactions to OPEC policy decisions during conflict periods for the US and UK stock markets. During conflict periods, oil markets require time to incorporate OPEC decisions. Conversely, in non-conflict periods the evidence suggests that the oil markets incorporate OPEC decisions efficiently. Copyright 2006 Organization of the Petroleum Exporting Countries.

Suggested Citation

  • Marco G.D. Guidi & Alexander Russell & Heather Tarbert, 2006. "The effect of OPEC policy decisions on oil and stock prices," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 30(1), pages 1-18, March.
  • Handle: RePEc:bla:opecrv:v:30:y:2006:i:1:p:1-18
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    Cited by:

    1. Balcilar, Mehmet & Ozdemir, Zeynel Abidin, 2013. "The causal nexus between oil prices and equity market in the U.S.: A regime switching model," Energy Economics, Elsevier, vol. 39(C), pages 271-282.
    2. Mohamed Amine BOUTABA, "undated". "Does Carbon Affect European Oil Companies' Equity Values?," EcoMod2009 21500018, EcoMod.
    3. Lin, Sharon Xiaowen & Tamvakis, Michael, 2010. "OPEC announcements and their effects on crude oil prices," Energy Policy, Elsevier, vol. 38(2), pages 1010-1016, February.
    4. Reboredo, Juan C. & Wen, Xiaoqian, 2015. "Are China’s new energy stock prices driven by new energy policies?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 45(C), pages 624-636.
    5. Medel, Carlos A., 2015. "Geopolitical Tensions, OPEC News, and Oil Price: A Granger Causality Analysis," MPRA Paper 65667, University Library of Munich, Germany.
    6. Berk, Istemi & Rauch, Jannes, 2016. "Regulatory interventions in the US oil and gas sector: How do the stock markets perceive the CFTC's announcements during the 2008 financial crisis?," Energy Economics, Elsevier, vol. 54(C), pages 337-348.
    7. Lizardo, Radhamés A. & Mollick, André V., 2010. "Oil price fluctuations and U.S. dollar exchange rates," Energy Economics, Elsevier, vol. 32(2), pages 399-408, March.
    8. Elbeck, Matt, 2010. "Advancing the design of a dynamic petro-dollar currency basket," Energy Policy, Elsevier, vol. 38(4), pages 1938-1945, April.
    9. Loutia, Amine & Mellios, Constantin & Andriosopoulos, Kostas, 2016. "Do OPEC announcements influence oil prices?," Energy Policy, Elsevier, vol. 90(C), pages 262-272.
    10. Nandha, Mohan & Faff, Robert, 2008. "Does oil move equity prices? A global view," Energy Economics, Elsevier, vol. 30(3), pages 986-997, May.

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