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Does the Iranian oil supply matter for the oil prices?

Author

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  • Mohammad Reza Farzanegan

    () (University of Marburg)

Abstract

There is an increasing tension between the Iranian Government and the west on an increasingly likely European oil embargo and the Iranian threat to close the Strait of Hormuz. The main question is: What will happen to the international oil prices in the case of shocks in the flow of Iranian oil to the international markets? In this study, we analyze the dynamic relationship between the Iranian oil supply and international oil prices from January 1973 - September 2011, using a modified version of the Granger causality test introduced by Toda and Yamamoto (1995). Our results show that there is no Granger causality between the Iranian oil production and international oil prices. Historical data on the Iranian oil production do not provide any useful information to explain the current and future values of international oil prices. Thus, global oil prices do not follow shocks in the Iranian oil production.

Suggested Citation

  • Mohammad Reza Farzanegan, 2012. "Does the Iranian oil supply matter for the oil prices?," MAGKS Papers on Economics 201232, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    • Handle: RePEc:mar:magkse:201232
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    File URL: https://www.uni-marburg.de/fb02/makro/forschung/magkspapers/32-2012_farzanegan.pdf
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    References listed on IDEAS

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    Cited by:

    1. Dizaji, Sajjad Faraji, 2014. "The effects of oil shocks on government expenditures and government revenues nexus (with an application to Iran's sanctions)," Economic Modelling, Elsevier, vol. 40(C), pages 299-313.

    More about this item

    Keywords

    Oil price; Oil production; VAR model; Granger causality; Sanction; Iran;

    JEL classification:

    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • Q34 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Natural Resources and Domestic and International Conflicts
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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