Disentangling the determinants of real oil prices

Liu, Li; Wang, Yudong; Wu, Chongfeng; Wu, Wenfeng

doi:10.1016/j.eneco.2016.04.003

Cited by 66 publications

(25 citation statements)

References 48 publications

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“…As the world's second largest economy and crude oil consumer country, the economic conditions in China should influence crude oil future prices. Previous literatures also found empirical evidence that China's economic condition plays a crucial role in the global oil market with respect to crude oil prices (Yuan et al, 2008) and oil price variation (Liu et al, 2016). However, in our results, the EPU in China do not have superior predictive power than other macroeconomic uncertainty factors.…”

Section: Out-of-sample Evaluationcontrasting

confidence: 74%

Macroeconomic Uncertainty and Crude Oil Futures Volatility–Evidence from China Crude Oil Futures Market

Yang

2021

Front. Environ. Sci.

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This paper investigates whether the macroeconomic uncertainty factors can explain and forecast China’s INE crude oil futures market volatility. We use the GARCH-MIDAS model to investigate the explaining and predicting power of the macroeconomic uncertainties. We considered various geopolitical risk (GPR) indices, economic policy uncertainty (EPU) indices, and infectious disease pandemic (IDEMV) indices in our model. The empirical results suggest that the geopolitical risk, the geopolitical act risk, the global economic policy uncertainty, the economic policy uncertainty from the United Kingdom, and the economic policy uncertainty from Japan comprehensively integrate the information contained in the rest factors, and have superior predictive powers for INE crude oil future volatility. These findings highlight the importance of the impact of macroeconomic uncertainty factors has on the crude oil futures market, and indicate that the macroeconomic uncertainties need to be considered when explaining and forecasting crude oil futures market volatility.

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Section: Out-of-sample Evaluationcontrasting

confidence: 74%

Macroeconomic Uncertainty and Crude Oil Futures Volatility–Evidence from China Crude Oil Futures Market

Yang

2021

Front. Environ. Sci.

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“…What is more, the occurrence of geopolitical events has had little impact after the year 2000, and very few geopolitical events have had any temporary impact on the mean of real oil prices, as suggested by Noguera‐Santaella (). Therefore, an increase in crude oil prices is primarily driven by demand, rather than oil supply (Kilian, ; Liu, Wang, Wu, & Wu, ). As a result, crude oil price shocks would cause positive impact on China's economy in the short run.…”

Section: Empirical Results and Analysesmentioning

confidence: 99%

Crude oil price shocks, monetary policy, and China's economy

et al. 2018

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This paper develops a time‐varying parameter vector autoregressive model to examine the dynamic effects of crude oil prices and monetary policy on China's economy during January 1996 to June 2017. The empirical results indicate that (a) in general, international crude oil price shocks have positive effect on China's economic growth and inflation in the short run, but the long‐run effect appears diverse; (b) China's monetary policy shocks have positive effect on the economic growth and inflation overall; specifically, an increase in monetary supply can partly offset crude oil prices' negative effect on China's economic growth; (c) China's monetary policy has positive effect on crude oil prices and plays an important role in the relationship between crude oil price shocks and economy; and (d) during the recent global financial crisis, crude oil price shocks produce greater negative effect on China's economic growth, whereas the long‐run effect of monetary policy on China's economic growth proves weaker, compared with other periods.

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“…Lorusso and Pieroni [78] find that political events and consequential supply shocks did not affect prices since the mid-1970 s. This role was played by the precautionary oil demand swifts, which are the main contributors to oil price formulation. Liu et al [79] suggest that the Chinese and the US demand are the oil price drivers. Byrne et al [80] suggest the time-varying relationship between demand and oil price.…”

Section: Pwy (2011)mentioning

confidence: 99%

Detecting West Texas Intermediate (WTI) Prices’ Bubble Periods

Perifanis¹

2019

Energies

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Oil prices have had considerable surges and bursts since the first oil crisis of 1973. Until then its price was stable, with almost zero volatility. Since then, apart from the two oil crises of 1973 and 1978/9, oil prices had consecutive bubble episodes like the surges up to 2008 and 2014 and their successive bursts, respectively. The trace of these bubble periods is of crucial importance for policymakers, since their drivers and consequences impact global economic developments. Phillips et al. and Phillips et al. methodologies are applied to detect whether West Texas Intermediate prices experienced bubble periods. Both methodologies suggest that WTI prices experienced explosive episodes, which could be fundamentally, speculatively, or politically attributed. Some suggested periods coincide for both methods, but the second methodology seems to be more sensitive than its predecessor is, leading to better bubble detection but also to identification of non-existent bubbles. The identified bubble periods are compared to relevant research in the literature concerning their presence, duration, and explosiveness. The main goal of the research, apart from the detection of bubbles’ presence and duration, is to identify the causal underlying reasons for each explosive episode. Further, we compare the start and endpoints of each bubble episode with time-points when structural changes occurred. The contribution of the paper is that it clearly defines the bubble episodes with their corresponding drivers. The paper identifies the importance of market fundamentals’ swifts in explaining the bubble periods. The findings of the papers can help policymakers and other stakeholders to monitor oil price shifts and their underlying reasons, and then proceed with prompt actions. Since bubble episodes are fundamentally explained, then the practical utility is that by focusing on the market fundamentals, stakeholders can avoid actions that could result in market failures.

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Disentangling the determinants of real oil prices

Cited by 66 publications

References 48 publications

Macroeconomic Uncertainty and Crude Oil Futures Volatility–Evidence from China Crude Oil Futures Market

Macroeconomic Uncertainty and Crude Oil Futures Volatility–Evidence from China Crude Oil Futures Market

Crude oil price shocks, monetary policy, and China's economy

Detecting West Texas Intermediate (WTI) Prices’ Bubble Periods

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