Factors Causing Oil Price Shocks With Emphasis on the Behavior of Large Producers

Subject Areas : Labor and Demographic Economics

Jalal Dehnavi ¹ , Mir Hossein Mousavi ²

1 - Associate Professor, Department of economics, Faculty of Social Science and Economics, Alzahra University
2 - Assistant Professor, Department of Economics, Faculty of Social Science and Economics, Alzahra University

Received: 2022-02-20 Accepted : 2022-06-10 Published : 2022-06-20

Keywords: Q32, Supply shocks, demand shocks, JEL Classification: C18, Q43 Keywords: Oil shocks, structural vector autoregression model (SVAR), oil price war,

Abstract :

The aim of the article is to present a new approach to the analysis of oil price shocks and, of course, a better explanation of oil wars. To achieve the goal, the structural vector autoregression model based on the Kilian (2009) model has been used with the aim of modeling oil market shocks during the period of 1985-2019. The results showed that the recent price war, due to the significant growth of the US oil supply (supply shock) and its simultaneous with the spread of the corona virus (demand shock), has caused a sharp decrease in the price of oil and shortened the price war period. 

References:

• شاکری، عباس (1395). اقتصاد خرد 2 (نظریه­ها و کاربردها)، نشر نی.


• Razek, Noha HA, & Nyakundi M. Michieka. (2019), OPEC and non-OPEC production, global demand, and the financialization of oil. Research in International Business and Finance 50: 201-225.‏


• Barsky, R. , & Kilian, L. (2004). Oil and the macro economy since the 1970s. Journal of Economic Perspectives, 18(4), 115-134.


• Chatziantoniou, I., Filippidis, M., Filis, G., & Gabauer, D. (2021). A closer look into the global determinants of oil price volatility. Energy Economics, 95, 105092.


• Dudlák, T. (2018). After the sanctions: Policy challenges in transition to a new political economy of the Iranian oil and gas sectors. Energy policy, 121, 464-475.


• Fattouh B, Kilian L,& Mahadeva L. (2013). The role of speculation in oil markets: What have we learned so far? Energy 34:7–33.


• Fattouh B, & Mahadeva L. (2013). Causes and implications of shifts in financial participation in commodity markets. Unpub. Pap., Oxford Univ.


• Green EJ., & Porter RH. (1984). Noncooperative collusion under imperfect price information. Econometrica 52:87–100.


• Hamilton, J. D. (2003). What is an oil shock? Journal of econometrics, 113(2), 363-398.


• Hamilton, J. D. (2009). Causes and Consequences of the Oil Shock of 2007-08 (No. w15002). National Bureau of Economic Research.


• Jibril, H., Chaudhuri, K., & Mohaddes, K. (2020). Asymmetric oil prices and trade imbalances: Does the source of the oil shock matter? Energy Policy, 137, 111100.


• Kilian L., & Lee TK. (2014). Quantifying the speculative component in the real price of oil: the role of global oil inventories. J. Int. Money Finance. 42:71–87.


• Kilian, L. (2014). Oil price shocks: Causes and consequences.


• Kilian, Lutz. (2009), not all oil price shocks are alike: Disentangling demand and supply shocks in the crude oil market. American Economic Review99, no. 3: 1053-69.


• Knittel CR,& Pindyck RS. (2013). the simple economics of commodity price speculation. Unpub. Pap. Sloan Sch. Manag., Mass. Inst. Technol.


• Křehlík, T., & Baruník, J. (2017). Cyclical properties of supply-side and demand-side shocks in oil-based commodity markets. Energy Economics, 65, 208-218.


• Leduc, S., & Sill, K. (2004). A quantitative analysis of oil-price shocks, systematic monetary policy, and economic downturns. Journal of Monetary Economics, 51(4), 781-808.


• Lütkepohl, H. (2005). New introduction to multiple time series analysis. Springer Science & Business Media.‏


• Nakov A. & Nuño G. (2013). Saudi Aramco and the oil market. Econ. J. 123:1333–62.


• Zellner, Arnold. (1962). An efficient method of estimating seemingly unrelated regressions and tests for aggregation bias. Journal of the American statistical Association 57, (298): 348-368.