Quantifying the speculative component in the real price of oil: The role of global oil inventories

Kilian, Lutz; Lee, Thomas K.

doi:10.1016/j.jimonfin.2013.08.005

Cited by 284 publications

(231 citation statements)

References 15 publications

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“…Others have found evidence in inventory data that they interpret as consistent with an important role for speculation, driven for example by geopolitical fears of disruption to the supply of Mideastern oil. (See Kilian and Murphy, 2013;Kilian and Lee, 2013).…”

Section: Macroeconomic Influencesmentioning

confidence: 99%

Effects of speculation and interest rates in a “carry trade” model of commodity prices

Frankel

2014

Journal of International Money and Finance

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The paper presents and estimates a model of the prices of oil and other storable commodities, a model that can be characterized as reflecting the carry trade. It focuses on speculative factors, here defined as the trade-off between interest rates on the one hand and market participants' expectations of future price changes on the other hand. It goes beyond past research by bringing to bear new data sources: survey data to measure expectations of future changes in commodity prices and options data to measure perceptions of risk. Some evidence is found of a negative effect of interest rates on the demand for inventories and thereby on commodity prices and positive effects of expected future price gains on inventory demand and thereby on today's commodity prices.

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Section: Macroeconomic Influencesmentioning

confidence: 99%

Effects of speculation and interest rates in a “carry trade” model of commodity prices

Frankel

2014

Journal of International Money and Finance

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“…This is in contrast to the classical competitive storage models and rather provides long-term evidence in support of Alquist and Kilian (2010), Kilian and Lee (2013), Kilian and Murphy (2013), and others who maintain that storage in the presence of expected supply shortfalls helps to explain price fluctuations.…”

Section: ) Andmentioning

confidence: 54%

150 Years of Boom and Bust: What Drives Mineral Commodity Prices?

Stuermer

2014

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My paper provides long-run evidence on the dynamic effects of supply and demand shocks on mineral commodity prices. I assemble and analyze a new data set of price and production levels of copper, lead, tin, and zinc from 1840 to 2010. Price fluctuations are primarily driven by demand rather than supply shocks. Demand shocks affect the price persistently for up to fifteen years, whereas the effect of mineral supply shocks persists for a maximum of five years. My paper shows that price surges caused by rapid industrialization are a recurrent phenomenon throughout history. Mineral commodity prices return to their declining or stable trends in the long run.JEL classification: E30, Q31, Q33, N50

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“…Consistent with Kilian (2009), Kilian and Murphy (2014) and Kilian and Lee (2014), the structural shocks are identified based on a combination of sign restrictions and bounds on the shortrun price elasticities of oil demand and oil supply. The first three shocks were proposed in the earlier work of Kilian (2009), who proposed a model that allows for the identification of oil shocks and contributes to the understanding of their relative importance in determining the real price of oil.…”

Section: Identifying Oil Shocks Using Sign Restrictionsmentioning

confidence: 96%

“…Since the financialization of commodity markets, the coincident increase in oil prices and speculators in the crude oil futures market have led to allegations that speculators drive crude oil prices. The works of Kilian and Murphy (2014) and Kilian and Lee (2014) refer to such a shock as a speculative demand shock in the spot market for crude oil, which is constructed by scaling US crude oil inventory data by the ratio of the OECD petroleum inventories over US petroleum inventories. This focus on above-ground crude oil inventories is consistent with conventional accounts of speculation involving the accumulation of oil inventories in oil-importing economies.…”

Section: Identifying Oil Shocks Using Sign Restrictionsmentioning

confidence: 99%

What Drives Long-term Oil Market Volatility? Fundamentals versus Speculation

Yin

Zhou

2016

Economics

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This paper explores the role of speculation and economy fundamentals in the oil market using a two-component GARCH-MIDAS model. Specifically, the authors highlight the different roles played by the changing oil shocks with respect to the short-term and long-term components regarding oil market volatility. The results indicate that a global demand shock is the only factor found not only to be positive but to also significantly increase long-and short-term oil volatility in the full sample. This is consistent with a classic host of research that advocates that global demand dominates the oil market. However, since 2004, impacts of other oil shocks have been significantly weakened or even reversed. For example, the speculative demand shock has helped to stabilize long-term oil volatility during the post-2004 period. The results also suggest the existence of asymmetric impacts on short-term oil volatility, particularly for shocks from oil supply, oil-specific demand and oil speculative demand. JEL Q43

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Quantifying the speculative component in the real price of oil: The role of global oil inventories

Cited by 284 publications

References 15 publications

Effects of speculation and interest rates in a “carry trade” model of commodity prices

Effects of speculation and interest rates in a “carry trade” model of commodity prices

150 Years of Boom and Bust: What Drives Mineral Commodity Prices?

What Drives Long-term Oil Market Volatility? Fundamentals versus Speculation

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