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The Three Epochs of Oil


  • Eyal Dvir

    () (Boston College)

  • Ken Rogoff

    (Harvard University)


We test for changes in price behavior in the longest crude oil price series available (1861-2008). We find strong evidence for changes in persistence and in volatility of price across three well defined periods. We argue that historically, the real price of oil has tended to be highly persistent and volatile whenever rapid industrialization in a major world economy coincided with uncertainty regarding access to supply. We present a modified commodity storage model that fully incorporates demand, and further can accommodate both transitory and permanent shocks. We show that the role of storage when demand is subject to persistent growth shocks is speculative, instead of its classic mitigating role. This result helps to account for the increased volatility of oil price we observe in these periods.

Suggested Citation

  • Eyal Dvir & Ken Rogoff, 2009. "The Three Epochs of Oil," Boston College Working Papers in Economics 706, Boston College Department of Economics.
  • Handle: RePEc:boc:bocoec:706

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    References listed on IDEAS

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    Cited by:

    1. Angus Deaton, 2010. "Understanding the Mechanisms of Economic Development," Journal of Economic Perspectives, American Economic Association, vol. 24(3), pages 3-16, Summer.
    2. Dvir, Eyal & Rogoff, Kenneth, 2014. "Demand effects and speculation in oil markets: Theory and evidence," Journal of International Money and Finance, Elsevier, vol. 42(C), pages 113-128.
    3. Gauvin, Ludovic & Rebillard, Cyril, 2013. "Towards Recoupling? Assessing the Impact of a Chinese Hard Landing on Commodity Exporters: Results from Conditional Forecast in a GVAR Model," MPRA Paper 65457, University Library of Munich, Germany.
    4. Marc Gronwald, 2009. "Jumps in Oil Prices- Evidence and Implications," ifo Working Paper Series 75, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    5. Michele Ruta & Anthony J. Venables, 2012. "International Trade in Natural Resources: Practice and Policy," Annual Review of Resource Economics, Annual Reviews, vol. 4(1), pages 331-352, August.
    6. repec:eee:ecanpo:v:55:y:2017:i:c:p:179-193 is not listed on IDEAS
    7. Arezki, Rabah & Hadri, Kaddour & Loungani, Prakash & Rao, Yao, 2014. "Testing the Prebisch–Singer hypothesis since 1650: Evidence from panel techniques that allow for multiple breaks," Journal of International Money and Finance, Elsevier, vol. 42(C), pages 208-223.
    8. Zaklan, Aleksandar & Abrell, Jan & Neumann, Anne, 2016. "Stationarity changes in long-run energy commodity prices," Energy Economics, Elsevier, vol. 59(C), pages 96-103.
    9. Radoslaw Stefanski, 2014. "Structural Transformation and the Oil Price," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(3), pages 484-504, July.
    10. Stuart Landon and Constance Smith, 2015. "Rule-Based Resource Revenue Stabilization Funds: A Welfare Comparison," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    11. Tumen, Semih & Unalmis, Deren & Unalmis, Ibrahim & Unsal, D. Filiz, 2016. "Taxing fossil fuels under speculative storage," Energy Economics, Elsevier, vol. 53(C), pages 64-75.
    12. Iacono, Roberto, 2017. "A comparison of fiscal rules for resource-rich economies," Economic Analysis and Policy, Elsevier, vol. 55(C), pages 179-193.
    13. John R. Boyce, 2013. "Prediction and Inference in the Hubbert-Deffeyes Peak Oil Model," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    14. Christopher L. Foote & Jane Sneddon Little, 2011. "Oil and the macroeconomy in a changing world: a conference summary," Public Policy Discussion Paper 11-3, Federal Reserve Bank of Boston.
    15. repec:pri:rpdevs:deaton_understanding_mechanisms_of_economic_development_with_abstract_apr is not listed on IDEAS
    16. Aastveit, Knut Are, 2014. "Oil price shocks in a data-rich environment," Energy Economics, Elsevier, vol. 45(C), pages 268-279.

    More about this item


    Oil Price; Oil Shocks; Storage; Structural Change;

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • L7 - Industrial Organization - - Industry Studies: Primary Products and Construction
    • N5 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries

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