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Testing and Modeling Speculative Oil Price Bubbles: US and Global Markets

Author

Listed:
  • Luiz Eduardo Rocha

  • Wilfredo Leiva Maldonado

Abstract

This paper employs the model proposed by Scheinkman and Schechtman (1983), applied to oligopolistic competition among producers of storable goods, to establish the fundamental value of oil prices. Based on this value, we test for speculative bubbles in both Global and US market prices between July 1988 and May 2025. We examine explosive, multiple, periodic, and intrinsic bubbles, ultimately analyzing the dynamics of speculative bubbles under two unobservable regimes. Our findings confirm the existence of multiple bubbles in both markets, while periodic bubbles were found only in the US market. Given the presence of multiple bubbles, the regime-switching dynamics proved robust and consistent with periods where commodity prices deviated from their fundamental value at geometric rates. These results support the use of oil inventories as a key fundamental indicator for oil pricing.

Suggested Citation

  • Luiz Eduardo Rocha & Wilfredo Leiva Maldonado, 2026. "Testing and Modeling Speculative Oil Price Bubbles: US and Global Markets," Working Papers, Department of Economics 2026_08, University of São Paulo (FEA-USP).
    • Handle: RePEc:spa:wpaper:2028wpecon8
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    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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