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The 2008 oil bubble: Causes and consequences

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  • Tokic, Damir

Abstract

We argue that "the 2008 Oil Bubble" was directly and indirectly created by the Federal Reserve in response to deflationary risks that resurfaced after the housing bubble burst and the resulting credit crisis of 2008. Deflationary risks first appeared after the dot.com bubble burst in 2000 and after the terrorist attacks on September 11, 2001. Manipulation of the US dollar value has been one of the key emergency tools in the Fed's arsenal. During the entire period from 2000 to 2008, the US dollar has been falling, while the price of crude oil has been rising, with the culmination in July 2008. If other global central banks embrace the Fed's anti-deflationary strategies, the consequences could be dire for the global economy, potentially resulting in an ultimate gold bubble.

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  • Tokic, Damir, 2010. "The 2008 oil bubble: Causes and consequences," Energy Policy, Elsevier, vol. 38(10), pages 6009-6015, October.
  • Handle: RePEc:eee:enepol:v:38:y:2010:i:10:p:6009-6015
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    References listed on IDEAS

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    1. De Long, J Bradford, et al, 1990. " Positive Feedback Investment Strategies and Destabilizing Rational Speculation," Journal of Finance, American Finance Association, vol. 45(2), pages 379-395, June.
    2. James D. Hamilton, 2009. "Understanding Crude Oil Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 179-206.
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    Cited by:

    1. Lammerding, Marc & Stephan, Patrick & Trede, Mark & Wilfling, Bernd, 2013. "Speculative bubbles in recent oil price dynamics: Evidence from a Bayesian Markov-switching state-space approach," Energy Economics, Elsevier, vol. 36(C), pages 491-502.
    2. Fantazzini, Dean, 2016. "The oil price crash in 2014/15: Was there a (negative) financial bubble?," Energy Policy, Elsevier, vol. 96(C), pages 383-396.
    3. Fang, Chung-Rou & You, Shih-Yi, 2014. "The impact of oil price shocks on the large emerging countries' stock prices: Evidence from China, India and Russia," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 330-338.
    4. Gil-Alana, Luis A. & Gupta, Rangan & Olubusoye, Olusanya E. & Yaya, OlaOluwa S., 2016. "Time series analysis of persistence in crude oil price volatility across bull and bear regimes," Energy, Elsevier, vol. 109(C), pages 29-37.
    5. Zhang, Yue-Jun & Wang, Jing, 2015. "Exploring the WTI crude oil price bubble process using the Markov regime switching model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 421(C), pages 377-387.
    6. Tokic, Damir, 2012. "The economic and financial dimensions of degrowth," Ecological Economics, Elsevier, vol. 84(C), pages 49-56.
    7. Tokic, Damir, 2015. "The 2014 oil bust: Causes and consequences," Energy Policy, Elsevier, vol. 85(C), pages 162-169.
    8. repec:eee:ecmode:v:70:y:2018:i:c:p:97-114 is not listed on IDEAS
    9. Tokic, Damir, 2012. "Speculation and the 2008 oil bubble: The DCOT Report analysis," Energy Policy, Elsevier, vol. 45(C), pages 541-550.
    10. Tokic, Damir, 2011. "Rational destabilizing speculation, positive feedback trading, and the oil bubble of 2008," Energy Policy, Elsevier, vol. 39(4), pages 2051-2061, April.
    11. Bohl, Martin T. & Kaufmann, Philipp & Siklos, Pierre L., 2015. "What drove the mid-2000s explosiveness in alternative energy stock prices? Evidence from U.S., European and global indices," International Review of Financial Analysis, Elsevier, vol. 40(C), pages 194-206.
    12. Su, Chi-Wei & Li, Zheng-Zheng & Chang, Hsu-Ling & Lobonţ, Oana-Ramona, 2017. "When Will Occur the Crude Oil Bubbles?," Energy Policy, Elsevier, vol. 102(C), pages 1-6.

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    Keywords

    The oil bubble Deflation The Fed;

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