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The shale revolution and shifting crude dynamics

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  • Malick Sy
  • Liuren Wu

Abstract

Oil price fluctuates in response to both demand and supply shocks. This paper proposes a new methodology that allows for timely identification of the shifting contribution from the two types of shock through a joint analysis of crude futures options and stock index options. Historical analysis shows that crude oil price movements are dominated by supply shocks from 2004 to 2008, but demand shocks have become much more dominant since then. The large demand shock following the 2008 financial crisis contributes to the start of this dynamics shift, whereas the subsequent shale revolution has fundamentally altered the crude supply behavior.

Suggested Citation

  • Malick Sy & Liuren Wu, 2020. "The shale revolution and shifting crude dynamics," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 35(2), pages 160-175, March.
    • Handle: RePEc:wly:japmet:v:35:y:2020:i:2:p:160-175
    DOI: 10.1002/jae.2745
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    Cited by:

    1. Ulrich Blum & Jiarui Zhong, 2021. "The Loss of Raw Material Criticality: Implications of the Collapse of Saudi Arabian Oil Exports," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 56(6), pages 362-370, November.

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