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Disentangling the determinants of real oil prices

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  • Liu, Li
  • Wang, Yudong
  • Wu, Chongfeng
  • Wu, Wenfeng

Abstract

In this study, we quantify the impacts of economic fundamentals and derivative market speculation on the real price of crude oil. Using a structural VAR with sign restriction, we determine that oil demand from the US and China, particularly the latter one, plays a crucial role in oil price changes after the year 2000. The contribution of speculation does not exceed 10% of oil price variations in our sample period.

Suggested Citation

  • Liu, Li & Wang, Yudong & Wu, Chongfeng & Wu, Wenfeng, 2016. "Disentangling the determinants of real oil prices," Energy Economics, Elsevier, vol. 56(C), pages 363-373.
    • Handle: RePEc:eee:eneeco:v:56:y:2016:i:c:p:363-373
    DOI: 10.1016/j.eneco.2016.04.003
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    More about this item

    Keywords

    Oil price; Fundamentals; Speculation; Structural VAR; Sign restriction;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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