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A Structural Model of the Global Oil Market

Author

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  • Reinhard Ellwanger

Abstract

This note presents a structural vector autoregressive (SVAR) model of the global oil market. The model identifies four types of shocks with different economic interpretations: oil supply shocks, oil-market-specific demand shocks, storage demand shocks and shocks to global economic growth. The historical decomposition of oil price fluctuations suggests that oil supply shocks were the dominant force during the 2014–15 oil price decline. Several examples illustrate the model’s usefulness for conditional forecasts of oil market variables under different scenarios for global GDP growth and oil consumption.

Suggested Citation

  • Reinhard Ellwanger, 2019. "A Structural Model of the Global Oil Market," Staff Analytical Notes 2019-17, Bank of Canada.
    • Handle: RePEc:bca:bocsan:19-17
    DOI: 10.34989/san-2019-17
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    References listed on IDEAS

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    1. René Lalonde & Dirk Muir, 2007. "The Bank of Canada's Version of the Global Economy Model (BoC-GEM)," Technical Reports 98, Bank of Canada.
    2. Ron Alquist & Lutz Kilian, 2010. "What do we learn from the price of crude oil futures?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(4), pages 539-573.
    3. Kilian,Lutz & Lütkepohl,Helmut, 2018. "Structural Vector Autoregressive Analysis," Cambridge Books, Cambridge University Press, number 9781107196575, Enero-Abr.
    4. Kilian, Lutz & Zhou, Xiaoqing, 2018. "Modeling fluctuations in the global demand for commodities," Journal of International Money and Finance, Elsevier, vol. 88(C), pages 54-78.
    5. repec:aen:journl:2009v30-02-a09 is not listed on IDEAS
    6. Doga Bilgin & Reinhard Ellwanger, 2019. "The Simple Economics of Global Fuel Consumption," Staff Working Papers 19-35, Bank of Canada.
    7. Christiane Baumeister & Lutz Kilian, 2014. "Real-Time Analysis of Oil Price Risks Using Forecast Scenarios," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 62(1), pages 119-145, April.
    8. Lutz Kilian & Daniel P. Murphy, 2014. "The Role Of Inventories And Speculative Trading In The Global Market For Crude Oil," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 29(3), pages 454-478, April.
    9. Lutz Kilian, 2009. "Not All Oil Price Shocks Are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market," American Economic Review, American Economic Association, vol. 99(3), pages 1053-1069, June.
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    Cited by:

    1. Étienne Latulippe & Kun Mo, 2019. "Outlook for Electric Vehicles and Implications for the Oil Market," Staff Analytical Notes 2019-19, Bank of Canada.

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    Keywords

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    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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