Living in an Era when Market Fundamentals Determine Crude Oil Price

Theodosios Perifanis and Athanasios Dagoumas

The Energy Journal, 2019, vol. 40, issue 1_suppl, 317-336

Abstract: Crude oil price plays a crucial role in the trajectory of the economic activity. This paper aims at quantifying the impact of the fundamental drivers of crude oil price, over the period 2008-2017 using monthly data. This period, with sharp fluctuations of crude oil prices, has not been examined thoroughly in the literature. We apply regression analysis to examine the crude oil price drivers, concluding that crude oil price follows mostly market fundamentals, such as consumption, OPEC production, shale production and days ahead consumption for OECD stocks. Results unveil the importance of both factors of demand and supply to affect the price. We also find evidence on the considerable impact of S&P crude oil index, as a “paper oil†market indicator. We do not find evidence from indicators measuring political instability, such as the number of terrorists attacks in oil producing countries, but as well the VIX volatility index, which—besides a market instability index—could also be perceived as an index incorporating political instability. The impact of political factors is not evident in our analysis, possibly because we do not consider related dummy variables. Moreover, the paper applies bivariate VAR and GARCH analysis to examine crude oil price volatility, not finding strong volatility transmission with the examined market indices, namely the S&P crude oil and the VIX indices.

Keywords: Oil price; Shale oil; OPEC; Market fundamentals; Volatility (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://journals.sagepub.com/doi/10.5547/01956574.40.SI1.tper (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sae:enejou:v:40:y:2019:i:1_suppl:p:317-336

DOI: 10.5547/01956574.40.SI1.tper

Access Statistics for this article

More articles in The Energy Journal
Bibliographic data for series maintained by SAGE Publications ().