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Determinants of Crude Oil Prices: Supply, Demand, Cartel or Speculation?


  • Andreas Breitenfellner

    () (Oesterreichische Nationalbank)

  • Jesús Crespo Cuaresma

    () (Vienna University of Economics and Business, Institute for Fiscal and Monetary Policy)

  • Catherine Keppel



Understanding the factors driving crude oil price developments is essential for assessing their effects. This paper examines four groups classifying a total of some thirty potential determinants of crude oil prices: fundamental factors, i.e. supply and demand, factors relating to the structure of the crude oil market (OPEC), and factors associated with the behavior of financial market participants (speculation). Bayesian Model Averaging (BMA) allows us to analyze a multitude of potential explanatory variables under model uncertainty and to quantify their robustness in explaining oil price inflation (price changes in percent). The results of our analysis suggest that the significance of individual factors varies over time. While no single factor dominates throughout the entire period under review (1983 to 2008), models explaining short-term movements in oil prices should always include headline inflation indicators and take into account the persistence of oil prices. In the 1990s, also the production quota of Saudi Arabia – a factor relating to the market structure – played a significant role; in the 2000s, both supply and demand (European demand for oil and refining capacities) have been highly important factors. The results of our analysis do not preclude the possibility that determinants other than those discussed here may become significant in the long run. While fundamental shortage conditions play a key role in driving up the pric

Suggested Citation

  • Andreas Breitenfellner & Jesús Crespo Cuaresma & Catherine Keppel, 2009. "Determinants of Crude Oil Prices: Supply, Demand, Cartel or Speculation?," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 4, pages 111-136.
  • Handle: RePEc:onb:oenbmp:y:2009:i:4:b:6

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    Cited by:

    1. N. N., 2014. "WIFO-Monatsberichte, issue 6/2014," WIFO Monatsberichte (monthly reports), WIFO, vol. 87(6), June.
    2. repec:dug:actaec:y:2017:i:1:p:157-172 is not listed on IDEAS
    3. repec:eee:eneeco:v:68:y:2017:i:c:p:77-88 is not listed on IDEAS
    4. repec:gam:jeners:v:11:y:2018:i:5:p:1207-:d:145404 is not listed on IDEAS
    5. Jorge Toro & Aarón Garavito & David Camilo López & Enrique Montes, 2015. "El choque petrolero y sus implicaciones en la economía colombiana," BORRADORES DE ECONOMIA 013829, BANCO DE LA REPÚBLICA.
    6. Nizar, Muhammad Afdi, 2012. "Dampak Fluktuasi Harga Minyak Dunia Terhadap Perekonomian Indonesia
      [The Impact of World Oil Prices Fluctuation on Indonesia’s Economy]
      ," MPRA Paper 65601, University Library of Munich, Germany.
    7. Kurt Kratena & Ina Meyer & Mark Sommer, 2014. "Long-term Energy Use in Austria. The Impacts of Carbon and Energy Prices up to 2030," WIFO Monatsberichte (monthly reports), WIFO, vol. 87(6), pages 427-441, June.

    More about this item


    oil price; Bayesian model averaging;

    JEL classification:

    • Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General
    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection


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