Oil Prices and the Hydrocarbon Markets: A Review

Ali Jadidzadeh, Mobin Mirzababaei and Apostolos Serletis
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Ali Jadidzadeh: Department of Economics, University of Tehran, Tehran 1411734115, Iran
Mobin Mirzababaei: Department of Economics, University of Tehran, Tehran 1411734115, Iran

Energies, 2022, vol. 15, issue 17, 1-9

Abstract: In this paper, we review the literature that investigates the impact of oil price shocks on the selected hydrocarbon prices. First, we present the empirical studies that presume, due to the global nature of the crude oil market, that the world oil price is an exogenous determining variable to the evolution of the local hydrocarbon markets such as natural gas or natural gas liquids (NGLs). Then, we present recent empirical studies that have improved our understanding of the source of oil price changes. They treat the real price of oil as an endogenous variable, identify the causes underlying oil price shocks, and then evaluate the impact of structural supply and demand shocks on the other hydrocarbon prices. The first strand of studies does not represent a consensus on the relationship between crude oil and other hydrocarbon prices—some demonstrate stable and asymmetric relationships, and some find no relationship or a very weak relationship. The second strand of studies shows that oil supply-side shocks have a transitory and temporary impact while oil demand-side shocks have a persistent and permanent impact on other hydrocarbon prices. In addition, it shows that the structural shocks in the global crude oil market explain approximately 50% of the variation in the other hydrocarbon markets in the long run.

Keywords: oil price shocks; hydrocarbon markets; transmission channels; asymmetries (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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