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Fracking, Wars and Stock Market Crashes: The Price of Oil During the Great Recession

Antonio J. Garzón and Luis Á. Hierro
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Antonio J. Garzón: Department of Economy and Economic History, University of Seville, Spain,
Luis Á. Hierro: Department of Economy and Economic History, University of Seville, Spain.

International Journal of Energy Economics and Policy, 2018, vol. 8, issue 2, 20-30

Abstract: This study analyses how oil prices have been affected by three types of events that took place during the Great Recession: the development of fracking, wars in Libya, Syria and Ukraine and the stock market crash of 2008. To do this, we employ co-integration analysis, using a vector error correction model (VECM) for a period spanning August 2007 to August 2016. The principal results obtained are: firstly, that including a variable to represent the increase in production associated to fracking in the US improves the model’s long term estimation, as it embraces a new variable co-integrated in the long term; secondly, that the wars in Libya and Ukraine only influenced prices indirectly, insofar as the former sparked a reduction in OPEC production and the latter an increase in OECD oil reserves, both short term; and thirdly, that the stock market crash of 2008 led to a short- term reduction in oil prices.

Keywords: Great Recession; oil prices; fracking; stock market crash; war. (search for similar items in EconPapers)
JEL-codes: Q4 Q43 (search for similar items in EconPapers)
Date: 2018
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