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Physical Market Determinants of the Price of Crude Oil and the Market Premium

Guillaume Chevillon () and Christine Rifflart

No DR 07020, ESSEC Working Papers from ESSEC Research Center, ESSEC Business School

Abstract: We analyze the physical, i.e. non financial, determinants of the real price of crude oil by means of an equilibrium correction model over the last two decades. We find that two cointegrating relations affect the change in prices: one refers to OPEC's cartel behavior attempting to control prices using its market power and quotas; the other to the coverage rate of expected future demand by OECD using inventory behaviours. We derive an equation for the change in oil prices which we use to assess the speculative elements of the early millennium price hike. We show that worries alien to the physical markets are the causes of the increase in oil prices and are able to quantify their impact.

Keywords: Cointegration; Forecast; Market Premium; Oil Price (search for similar items in EconPapers)
JEL-codes: C53 Q40 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2007-06
New Economics Papers: this item is included in nep-bec, nep-ene and nep-mic
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Related works:
Journal Article: Physical market determinants of the price of crude oil and the market premium (2009) Downloads
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