Examining Rational Bubbles in Oil Prices: Evidence From Frequency Domain Estimates

Adedoyin Isola Lawal, Adeniyi Olayanju, Afees Salisu, Abiola John Asaleye, Olatunde Dahunsi, Oluwasogo Dada, Oluwasola Emmanel Omoju and Olabisi Rasheedat Popoola
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Adedoyin Isola Lawal: Landmark University, Omu Aran, Nigeria,
Adeniyi Olayanju: Landmark University, Omu Aran, Nigeria,
Abiola John Asaleye: Landmark University, Omu Aran, Nigeria,
Olatunde Dahunsi: Landmark University, Omu Aran, Nigeria,
Oluwasogo Dada: Landmark University, Omu Aran, Nigeria,
Oluwasola Emmanel Omoju: Xiamen University, Xiamen, China.
Olabisi Rasheedat Popoola: Landmark University, Omu Aran, Nigeria,

International Journal of Energy Economics and Policy, 2019, vol. 9, issue 2, 166-173

Abstract: This study examined the existence of rational bubbles in oil prices by employing a frequency domain econophysics technique that have capacity to identify both explosive behaviour and bubbles in oil prices for the three largest oil future markets WTI, Brent and OPEC basket. Our results show that the three prices experienced bubbles in four distinct periods. We attempt to provide some explanations on each of these bubbles using geopolitical, war and economic events. We equally noted that oil prices bubbles are largely influenced by the fact that oil is a major source of energy and is non-renewable. The study observed that existence of bubbles have some economic consequences such as welfare loss resulting from distortion in prices and economic instability among others. We provide some policy recommendation.

Keywords: oil prices; rational bubbles; energy (search for similar items in EconPapers)
JEL-codes: C22 C50 G10 G12 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eco:journ2:2019-02-19

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