How does ENSO impact U.S. Oil Spot and Future Prices?

Marco Gallegati (), William Ginn (), Jamel Saadaoui, Solomos Solomou () and Kun Tian ()
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Marco Gallegati: Polytechnic University of Marche
William Ginn: Labcorp, Coburg University of Applied Sciences
Solomos Solomou: University of Cambridge
Kun Tian: University of Kent

No 2025.20, Working Papers from International Network for Economic Research - INFER

Abstract: This paper examines the impact of El Niño-Southern Oscillation (ENSO) shocks on U.S. oil futures and goods market prices from 1983:03 to 2024:10 via the Time-Varying Parameter Local Projections (TVP-LP) model. By allowing impulse responses to evolve over time, we capture dynamic shifts in the oil market’s sensitivity to El Niño and La Niña events across different time-horizons. Our findings reveal an asymmetric response, where El Niño shocks exhibit a negative effect on oil futures and goods market prices, while La Niña shocks—especially extreme ones—lead to persistent upward price pressures. The effect becomes more pronounced at horizons within 12 months, indicating delayed transmission mechanisms through supply chain disruptions and changes in global energy demand. Additionally, the response intensifies in extreme ENSO episodes, highlighting non-linearities in climate-driven oil price fluctuations.

Keywords: Oil futures and goods market price; ENSO; local projections (search for similar items in EconPapers)
JEL-codes: E F Q (search for similar items in EconPapers)
Pages: 36 pages
Date: 2025
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