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Oil Prices and the Hydrocarbon Markets: A Review

Author

Listed:
  • Ali Jadidzadeh

    (Department of Economics, University of Tehran, Tehran 1411734115, Iran
    The School of Public Policy, University of Calgary, Calgary, AB T2P 1H9, Canada
    These authors contributed equally to this work.)

  • Mobin Mirzababaei

    (Department of Economics, University of Tehran, Tehran 1411734115, Iran
    These authors contributed equally to this work.)

  • Apostolos Serletis

    (Department of Economics, University of Calgary, Calgary, AB T2N 1N4, Canada
    These authors contributed equally to this work.)

Abstract

In this paper, we review the literature that investigates the impact of oil price shocks on the selected hydrocarbon prices. First, we present the empirical studies that presume, due to the global nature of the crude oil market, that the world oil price is an exogenous determining variable to the evolution of the local hydrocarbon markets such as natural gas or natural gas liquids (NGLs). Then, we present recent empirical studies that have improved our understanding of the source of oil price changes. They treat the real price of oil as an endogenous variable, identify the causes underlying oil price shocks, and then evaluate the impact of structural supply and demand shocks on the other hydrocarbon prices. The first strand of studies does not represent a consensus on the relationship between crude oil and other hydrocarbon prices—some demonstrate stable and asymmetric relationships, and some find no relationship or a very weak relationship. The second strand of studies shows that oil supply-side shocks have a transitory and temporary impact while oil demand-side shocks have a persistent and permanent impact on other hydrocarbon prices. In addition, it shows that the structural shocks in the global crude oil market explain approximately 50% of the variation in the other hydrocarbon markets in the long run.

Suggested Citation

  • Ali Jadidzadeh & Mobin Mirzababaei & Apostolos Serletis, 2022. "Oil Prices and the Hydrocarbon Markets: A Review," Energies, MDPI, vol. 15(17), pages 1-9, August.
    • Handle: RePEc:gam:jeners:v:15:y:2022:i:17:p:6192-:d:897901
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    References listed on IDEAS

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    1. Jikun Liu & Litao Wang & Fei Chen & Wenya Hu & Chenglong Dong & Yinghao Wang & Yehua Han, 2023. "Molecular Characterization of Hydrocarbons in Petroleum by Ultrahigh-Resolution Mass Spectrometry," Energies, MDPI, vol. 16(11), pages 1-16, May.

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