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The 2006-2008 Oil Bubble and Beyond

Author

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  • D. Sornette

    (ETH Zurich)

  • R. Woodard

    (ETH Zurich)

  • W. -X. Zhou

    (ECUST, China)

Abstract

We present an analysis of oil prices in US$ and in other major currencies that diagnoses unsustainable faster-than-exponential behavior. This supports the hypothesis that the recent oil price run-up has been amplified by speculative behavior of the type found during a bubble-like expansion. We also attempt to unravel the information hidden in the oil supply-demand data reported by two leading agencies, the US Energy Information Administration (EIA) and the International Energy Agency (IEA). We suggest that the found increasing discrepancy between the EIA and IEA figures provides a measure of the estimation errors. Rather than a clear transition to a supply restricted regime, we interpret the discrepancy between the IEA and EIA as a signature of uncertainty, and there is no better fuel than uncertainty to promote speculation!

Suggested Citation

  • D. Sornette & R. Woodard & W. -X. Zhou, 2008. "The 2006-2008 Oil Bubble and Beyond," Papers 0806.1170, arXiv.org, revised Jul 2008.
    • Handle: RePEc:arx:papers:0806.1170
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    File URL: http://arxiv.org/pdf/0806.1170
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    Cited by:

    1. D. Sornette & R. Woodard, "undated". "Financial Bubbles, Real Estate bubbles, Derivative Bubbles, and the Financial and Economic Crisis," Working Papers CCSS-09-003, ETH Zurich, Chair of Systems Design.
    2. Kenneth J. Singleton, 2014. "Investor Flows and the 2008 Boom/Bust in Oil Prices," Management Science, INFORMS, vol. 60(2), pages 300-318, February.

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