The Fundamental and Speculative Components of the Oil Spot Price: A Real Option Value Approach
This paper investigates the recent evolution of the oil price, with the objective to analyze the main drivers that during last fifteen years have led the unstable path and the volatility persistence in the international oil market. We assume that the oil price is composed by two components, deterministic and speculative. The first one can be defined as the certain one, and it is referred to the fundamental component given by supply and demand interaction. Differently, the uncertain one is given by unclear changes in the price structure, and it is assumed to be linked to the speculative activity. Through a structural equation model (SEM) in a linear reduced form we find that the speculation in the oil market measured with the real option methodology can improve the traditional model explaining a consistent part of the oil fluctuations.
|Date of creation:||18 Apr 2012|
|Date of revision:||18 Apr 2012|
|Contact details of provider:|| Postal: |
Web page: http://www.ceistorvergata.it
More information through EDIRC
|Order Information:|| Postal: CEIS - Centre for Economic and International Studies - Faculty of Economics - University of Rome "Tor Vergata" - Via Columbia, 2 00133 Roma|
Web: http://www.ceistorvergata.it Email:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Chevillon, Guillaume & Rifflart, Christine, 2009.
"Physical market determinants of the price of crude oil and the market premium,"
Elsevier, vol. 31(4), pages 537-549, July.
- Chevillon, Guillaume & Rifflart, Christine, 2007. "Physical Market Determinants of the Price of Crude Oil and the Market Premium," ESSEC Working Papers DR 07020, ESSEC Research Center, ESSEC Business School.
- Roll, Richard, 1984. "Orange Juice and Weather," American Economic Review, American Economic Association, vol. 74(5), pages 861-80, December.
- John R. Moroney & M. Douglas Berg, 1999. "An Integrated Model of Oil Production," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 105-124.
- James J. Heckman, 2010.
"Building Bridges between Structural and Program Evaluation Approaches to Evaluating Policy,"
Journal of Economic Literature,
American Economic Association, vol. 48(2), pages 356-98, June.
- James J. Heckman, 2010. "Building Bridges Between Structural and Program Evaluation Approaches to Evaluating Policy," NBER Working Papers 16110, National Bureau of Economic Research, Inc.
- Stevans, Lonnie & Sessions, David, 2008. "Speculation, Futures Prices, and the U.S. Real Price of Crude Oil," MPRA Paper 9456, University Library of Munich, Germany, revised 04 Jul 2008.
- Zeng Tian & Swanson Norman R., 1998.
"Predictive Evaluation of Econometric Forecasting Models in Commodity Futures Markets,"
Studies in Nonlinear Dynamics & Econometrics,
De Gruyter, vol. 2(4), pages 1-21, January.
- Zeng, T. & Swanson, N.R., 1997. "Predictive Evaluation of Econometric Forecasting Models in Commodity Futures Markets," Papers 9-97-4, Pennsylvania State - Department of Economics.
- Matteo Manera & Chiara Longo & Anil Markandya & Elisa Scarpa, 2007. "Evaluating the Empirical Performance of Alternative Econometric Models for Oil Price Forecasting," Working Papers 2007.4, Fondazione Eni Enrico Mattei.
- Gulen, S. Gurcan, 1998. "Efficiency in the crude oil futures market," Journal of Energy Finance & Development, Elsevier, vol. 3(1), pages 13-21.
- Agnolucci, Paolo, 2009. "Volatility in crude oil futures: A comparison of the predictive ability of GARCH and implied volatility models," Energy Economics, Elsevier, vol. 31(2), pages 316-321, March.
- Serletis, Apostolos, 1991. "Rational expectations, risk and efficiency in energy futures markets," Energy Economics, Elsevier, vol. 13(2), pages 111-115, April.
- Kilian, Lutz & Rebucci, Alessandro & Spatafora, Nikola, 2007.
"Oil Shocks and External Balances,"
CEPR Discussion Papers
6303, C.E.P.R. Discussion Papers.
- Antonio Merino & Alvaro Ortiz, 2005. "Explaining the so-called "price premium" in oil markets," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 29(2), pages 133-152, 06.
- Morana, Claudio, 2001. "A semiparametric approach to short-term oil price forecasting," Energy Economics, Elsevier, vol. 23(3), pages 325-338, May.
- Kaufmann, Robert K., 1995. "A model of the world oil market for project LINK Integrating economics, geology and politics," Economic Modelling, Elsevier, vol. 12(2), pages 165-178, April.
- James D. Hamilton, 2009.
"Understanding Crude Oil Prices,"
The Energy Journal,
International Association for Energy Economics, vol. 0(Number 2), pages 179-206.
- Calcagnini, Giorgio & Saltari, Enrico, 2000. "Real and Financial Uncertainty and Investment Decisions," Journal of Macroeconomics, Elsevier, vol. 22(3), pages 491-514, July.
- Dees, Stephane & Karadeloglou, Pavlos & Kaufmann, Robert K. & Sanchez, Marcelo, 2007.
"Modelling the world oil market: Assessment of a quarterly econometric model,"
Elsevier, vol. 35(1), pages 178-191, January.
- DEES Stéphane & KARADELOGLOU Pavlos & KAUFMANN Robert & SANCHEZ Marcelo, . "Modelling the World Oil Market: Assessment of a Quarterly Econometric Model," EcoMod2003 330700040, EcoMod.
- Pindyck, Robert S, 1978. "Gains to Producers from the Cartelization of Exhaustible Resources," The Review of Economics and Statistics, MIT Press, vol. 60(2), pages 238-51, May.
- Robert Kaufmann & Pavlos Karadeloglou & Filippo di Mauro, 2008. "Will oil prices decline over the long run?," Occasional Paper Series 98, European Central Bank.
- Ye, Michael & Zyren, John & Shore, Joanne, 2005. "A monthly crude oil spot price forecasting model using relative inventories," International Journal of Forecasting, Elsevier, vol. 21(3), pages 491-501.
- Kaufmann, Robert K. & Ullman, Ben, 2009. "Oil prices, speculation, and fundamentals: Interpreting causal relations among spot and futures prices," Energy Economics, Elsevier, vol. 31(4), pages 550-558, July.
- Robert K. Kaufmann, Stephane Dees, Pavlos Karadeloglou and Marcelo Sanchez, 2004. "Does OPEC Matter? An Econometric Analysis of Oil Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 67-90.
- Askari, Hossein & Krichene, Noureddine, 2008. "Oil price dynamics (2002-2006)," Energy Economics, Elsevier, vol. 30(5), pages 2134-2153, September.
- Salant, Stephen W, 1976. "Exhaustible Resources and Industrial Structure: A Nash-Cournot Approach to the World Oil Market," Journal of Political Economy, University of Chicago Press, vol. 84(5), pages 1079-93, October.
- Bopp, Anthony E. & Lady, George M., 1991. "A comparison of petroleum futures versus spot prices as predictors of prices in the future," Energy Economics, Elsevier, vol. 13(4), pages 274-282, October.
When requesting a correction, please mention this item's handle: RePEc:rtv:ceisrp:229. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Barbara Piazzi)
If references are entirely missing, you can add them using this form.