What drives oil prices? Emerging versus developed economies

Knut Are Aastveit, Hilde C. Bjørnland () and Leif Thorsrud
Authors registered in the RePEc Author Service: Hilde Christiane Bjørnland ()

No No 2/2012, Working Papers from Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School

Abstract: We analyze the importance of demand from emerging and developed economies as drivers of the real price of oil. Using a method that allows us to identify demand from different groups of countries across the world, we find that demand from emerging economies (most notably from Asian countries) is more than twice as important as demand from developed countries in accounting for the fluctuations in the real price of oil and in oil production. Furthermore, we find that different geographical regions respond differently to oil supply shocks and oil-specific demand shocks that drive up oil prices, with Europe and North America being more negatively affected than emerging economies in Asia and South America. We demonstrate that this heterogeneity in responses is not only attributable to differences in energy intensity in production across regions but also to degree of openness and the investment share in GDP.

Keywords: Oil prices; emerging and developed countries; demand and supply shocks; factor augmented vector autoregressions (search for similar items in EconPapers)
JEL-codes: C32 E32 F41 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2012-12
New Economics Papers: this item is included in nep-cwa and nep-ene
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (35)

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Related works:
Journal Article: What Drives Oil Prices? Emerging Versus Developed Economies (2015)
Working Paper: What drives oil prices? Emerging versus developed economies (2013)
Working Paper: What drives oil prices? Emerging versus developed economies (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:bny:wpaper:0007

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