Role of Structural Shocks on Fluctuations of Crude Oil Prices

Document Type : Research Paper

Authors

1 -Ph.D. Candidate of Oil and Gas Economics, Allameh Tabataba'i University

2 Associate Professor of Mathematics, Allameh Tabataba'i University

3 Associate Professor of Economics, Allameh Tabataba'i University

Abstract

The drastic oil price fluctuations in recent years have made researchers and policymakers curious about the role of each structural shock in the Variability of crude oil prices. In this study, fluctuations of WTI & ORB prices are analyzed in the form of a structural vector auto regression model (SVAR) over the period from 2006 to 2018. Based on historical decomposition of WIT price, fluctuations of crude oil price in 2008 are mainly due to a combination of structural shocks, in which oil demand shocks play a significant role in the sharp fall of oil prices since the second half of 2008 Onwards. While the reason for the fall in WIT crude oil price in the second half of 2014 was largely due to supply shocks and oil inventory demand shocks. During this period, contango has accelerated the accumulation of crude oil commercial stocks and has intensified the oil price fall.

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Main Subjects


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  16.  Knittel, R., & Pindyck, R. (2013). The simple economics of commodity price speculation. American Economic Journal Macroeconomics, 8(2), 85-110.
  17.    Lombardi, J. (2011). Do financial investors destabilize the oil price? Working paper series of the European Central Bank (ECB), No.1346.
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