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Decoding Structural Shocks in the Global Oil Market

Author

Listed:
  • Irma Alonso-Álvarez

    (BANCO DE ESPAÑA)

  • Daniel Santabárbara

    (BANCO DE ESPAÑA)

Abstract

In this paper, we present a straightforward structural model of the oil market designed to disentangle demand and supply shocks. This model is regularly employed and updated in the Banco de España to enhance the understanding of oil market dynamics. Building on the work of Kilian and Murphy (2014), we introduce a novel business cycle measure based on the co-movement of real commodity prices to capture global demand shocks, and also include an oil-specific demand shock. Our impulse response functions and historical decomposition align with previous studies and effectively capture significant historical milestones.

Suggested Citation

  • Irma Alonso-Álvarez & Daniel Santabárbara, 2025. "Decoding Structural Shocks in the Global Oil Market," Occasional Papers 2513, Banco de España.
    • Handle: RePEc:bde:opaper:2513e
    DOI: https://doi.org/10.53479/40225
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    File URL: https://www.bde.es/f/webbe/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosOcasionales/25/Files/do2513e.pdf
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    More about this item

    Keywords

    oil structural model; supply; demand; global real activity; oil-specific demand; VAR; sign restrictions.;
    All these keywords.

    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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