Physical market determinants of the price of crude oil and the market premium
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.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Noureddine Krichene, 2008. "Crude Oil Prices; Trends and Forecast," IMF Working Papers 08/133, International Monetary Fund.
- Robert Barsky & Lutz Kilian, 2004.
"Oil and the Macroeconomy Since the 1970s,"
NBER Working Papers
10855, National Bureau of Economic Research, Inc.
- Noureddine Krichene, 2007. "An Oil and Gas Model," IMF Working Papers 07/135, International Monetary Fund.
- Neil R. Ericsson & James G. MacKinnon, 1999.
"Distributions of error correction tests for cointegration,"
International Finance Discussion Papers
655, Board of Governors of the Federal Reserve System (U.S.).
- Neil R. Ericsson & James G. MacKinnon, 2002. "Distributions of error correction tests for cointegration," Econometrics Journal, Royal Economic Society, vol. 5(2), pages 285-318, 06.
- Neil R. Ericsson & James G. MacKinnon, 2000. "Distributions of Error Correction Tests for Cointegration," Econometric Society World Congress 2000 Contributed Papers 0561, Econometric Society.
- Ramcharran, Harri, 2002. "Oil production responses to price changes: an empirical application of the competitive model to OPEC and non-OPEC countries," Energy Economics, Elsevier, vol. 24(2), pages 97-106, March.
- Hamilton, James D., 2003.
"What is an oil shock?,"
Journal of Econometrics,
Elsevier, vol. 113(2), pages 363-398, April.
- Bekiros, S. & Diks, C.G.H., 2007.
"The Relationship between Crude Oil Spot and Futures Prices: Cointegration, Linear and Nonlinear Causality,"
CeNDEF Working Papers
07-11, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
- Bekiros, Stelios D. & Diks, Cees G.H., 2008. "The relationship between crude oil spot and futures prices: Cointegration, linear and nonlinear causality," Energy Economics, Elsevier, vol. 30(5), pages 2673-2685, September.
- Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
- David Hendry & Hans-Martin Krolzig, 2003.
"The Properties of Automatic Gets Modelling,"
Economics Series Working Papers
2003-W14, University of Oxford, Department of Economics.
- David Hendry & Hans-Martin Krolzig, 2003. "The Properties of Automatic Gets Modelling," Economics Papers 2003-W14, Economics Group, Nuffield College, University of Oxford.
- Hendry, David F & Hans-Martin Krolzig, 2003. "The Properties of Automatic Gets Modelling," Royal Economic Society Annual Conference 2003 105, Royal Economic Society.
- Dees, Stephane & Karadeloglou, Pavlos & Kaufmann, Robert K. & Sanchez, Marcelo, 2007.
"Modelling the world oil market: Assessment of a quarterly econometric model,"
Elsevier, vol. 35(1), pages 178-191, January.
- DEES Stéphane & KARADELOGLOU Pavlos & KAUFMANN Robert & SANCHEZ Marcelo, . "Modelling the World Oil Market: Assessment of a Quarterly Econometric Model," EcoMod2003 330700040, EcoMod.
- Bacon, Robert W, 1991. "Modelling the Price of Oil," Oxford Review of Economic Policy, Oxford University Press, vol. 7(2), pages 17-34, Summer.
- Farzin, Y. H., 2001. "The impact of oil price on additions to US proven reserves," Resource and Energy Economics, Elsevier, vol. 23(3), pages 271-292, July.
- Ye, Michael & Zyren, John & Shore, Joanne, 2005. "A monthly crude oil spot price forecasting model using relative inventories," International Journal of Forecasting, Elsevier, vol. 21(3), pages 491-501.
- Ramcharran, Harri, 2001. "OPEC's production under fluctuating oil prices: further test of the target revenue theory," Energy Economics, Elsevier, vol. 23(6), pages 667-681, November.
- Geroski, Paul A & Ulph, Alistair M & Ulph, David T, 1987. "A Model of the Crude Oil Market in Which Market Conduct Varies," Economic Journal, Royal Economic Society, vol. 97(388a), pages 77-86, Supplemen.
- Sadorsky, Perry, 2002. "Time-varying risk premiums in petroleum futures prices," Energy Economics, Elsevier, vol. 24(6), pages 539-556, November.
- A. M. Ulph & G. M. Folie, 1980. "Exhaustible Resources and Cartels: An Intertemporal Nash-Cournot Model," Canadian Journal of Economics, Canadian Economics Association, vol. 13(4), pages 645-58, November.
- Kaufmann, Robert K. & Dees, Stephane & Gasteuil, Audrey & Mann, Michael, 2008. "Oil prices: The role of refinery utilization, futures markets and non-linearities," Energy Economics, Elsevier, vol. 30(5), pages 2609-2622, September.
- van Amano, Robert A & Norden, Simon, 1998.
"Exchange Rates and Oil Prices,"
Review of International Economics,
Wiley Blackwell, vol. 6(4), pages 683-94, November.
- Peter Wickham, 1996. "Volatility of Oil Prices," IMF Working Papers 96/82, International Monetary Fund.
- Fattouh, Bassam, 2010. "The dynamics of crude oil price differentials," Energy Economics, Elsevier, vol. 32(2), pages 334-342, March.
- Yang, C. W. & Hwang, M. J. & Huang, B. N., 2002. "An analysis of factors affecting price volatility of the US oil market," Energy Economics, Elsevier, vol. 24(2), pages 107-119, March.
- 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.
- Kuper, Gerard H., 2002.
"Measuring oil price volatility,"
02C43, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
- Verleger, Philip K, Jr, 1982. "The Determinants of Official OPEC Crude Prices," The Review of Economics and Statistics, MIT Press, vol. 64(2), pages 177-82, May.
- Robert S. Pindyck, 2001. "The Dynamics of Commodity Spot and Futures Markets: A Primer," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 1-30.
- Robert S. Pindyck, 1990.
"Inventories and the Short-Run Dynamics of Commodity Prices,"
NBER Working Papers
3295, National Bureau of Economic Research, Inc.
- Robert S. Pindyck, 1994. "Inventories and the Short-Run Dynamics of Commodity Prices," RAND Journal of Economics, The RAND Corporation, vol. 25(1), pages 141-159, Spring.
- Pindyck, Robert S., 1990. "Inventories and the short-run dynamics of commodity prices," Working papers 3133-90., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- R. Glenn Hubbard, 1986. "Supply Shocks and Price Adjustment in the World Oil Market," The Quarterly Journal of Economics, Oxford University Press, vol. 101(1), pages 85-102.
- Krichene, Noureddine, 2002. "World crude oil and natural gas: a demand and supply model," Energy Economics, Elsevier, vol. 24(6), pages 557-576, November.
- Griffin, James M, 1985. "OPEC Behavior: A Test of Alternative Hypotheses," American Economic Review, American Economic Association, vol. 75(5), pages 954-63, December.
- Fong, Wai Mun & See, Kim Hock, 2002. "A Markov switching model of the conditional volatility of crude oil futures prices," Energy Economics, Elsevier, vol. 24(1), pages 71-95, January.
- Cortazar, Gonzalo & Schwartz, Eduardo S., 2003. "Implementing a stochastic model for oil futures prices," Energy Economics, Elsevier, vol. 25(3), pages 215-238, May.
- Sadorsky, Perry, 2006. "Modeling and forecasting petroleum futures volatility," Energy Economics, Elsevier, vol. 28(4), pages 467-488, July.
- Antonio Merino & Alvaro Ortiz, 2005. "Explaining the so-called "price premium" in oil markets," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 29(2), pages 133-152, 06.
- Regnier, Eva, 2007. "Oil and energy price volatility," Energy Economics, Elsevier, vol. 29(3), pages 405-427, May.
- Noureddine Krichene, 2006. "Recent Dynamics of Crude Oil Prices," IMF Working Papers 06/299, International Monetary Fund.
- Gonzalo, Jesus, 1994. "Five alternative methods of estimating long-run equilibrium relationships," Journal of Econometrics, Elsevier, vol. 60(1-2), pages 203-233.
- repec:dgr:rugccs:200208 is not listed on IDEAS
- repec:dgr:rugsom:02c43 is not listed on IDEAS
- Hendry, David F., 1997. "On congruent econometric relations : A comment," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 47(1), pages 163-190, December.
- Gil-Alana, Luis A., 2001. "A fractionally integrated model with a mean shift for the US and the UK real oil prices," Economic Modelling, Elsevier, vol. 18(4), pages 643-658, December.
- Noureddine Krichene, 2006. "World Crude Oil Markets; Monetary Policy and the Recent Oil Shock," IMF Working Papers 06/62, International Monetary Fund.
- Tang, Linghui & Hammoudeh, Shawkat, 2002. "An empirical exploration of the world oil price under the target zone model," Energy Economics, Elsevier, vol. 24(6), pages 577-596, November.
- Robert K. Kaufmann, Stephane Dees, Pavlos Karadeloglou and Marcelo Sanchez, 2004. "Does OPEC Matter? An Econometric Analysis of Oil Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 67-90.
- Yu, Lean & Wang, Shouyang & Lai, Kin Keung, 2008. "Forecasting crude oil price with an EMD-based neural network ensemble learning paradigm," Energy Economics, Elsevier, vol. 30(5), pages 2623-2635, September.
- William D. Nordhaus, 1973. "The Allocation of Energy Resources," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 4(3), pages 529-576.
When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:31:y:2009:i:4:p:537-549. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.