On the Sources and Consequences of Oil Price Shocks: The Role of Storage

Deren Ünalmış, Ibrahim Unalmis and Filiz Unsal

No 2012/270, IMF Working Papers from International Monetary Fund

Abstract: Building on recent work on the role of speculation and inventories in oil markets, we embed a competitive oil storage model within a DSGE model of the U.S. economy. This enables us to formally analyze the impact of a (speculative) storage demand shock and to assess how the effects of various demand and supply shocks change in the presence of oil storage facility. We find that business-cycle driven oil demand shocks are the most important drivers of U.S. oil price fluctuations during 1982-2007. Disregarding the storage facility in the model causes a considerable upward bias in the estimated role of oil supply shocks in driving oil price fluctuations. Our results also confirm that a change in the composition of shocks helps explain the resilience of the macroeconomic environment to the oil price surge after 2003. Finally, speculative storage is shown to have a mitigating or amplifying role depending on the nature of the shock.

Keywords: WP; demand shock; oil storage; oil price fluctuations; oil demand; oil supply shocks speculative oil demand; sticky-price DSGE model; storage demand shocks; price of oil; oil supply shock; productivity shock; oil demand shocks; oil storage demand shock; Oil prices; Oil; Inflation; Commodity price fluctuations; Supply shocks; Global (search for similar items in EconPapers)
Pages: 41
Date: 2012-11-08
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Citations: View citations in EconPapers (19)

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Working Paper: On the Sources and Consequences of Oil Price Shocks: The Role of Storage (2012)
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