Understanding the decline in the price of oil since june 2014

Some observers have conjectured that oil supply shocks in the United States and in other countries are behind the plunge in the price of oil since June 2014. Others have suggested that a major shock to oil price expectat
Some observers have conjectured that oil supply shocks in the United States and in other countries are behind the plunge in the price of oil since June 2014. Others have suggested that a major shock to oil price expectations occurred when in late November 2014 OPEC announced that it would maintain current production levels despite the steady increase in non-OPEC oil production. Both conjectures are perfectly reasonable ex ante, yet we provide quantitative evidence that neither explanation appears supported by the data. We show that more than half of the decline in the price of oil was predictable in real time as of June 2014 and therefore must have reflected the cumulative effects of earlier oil demand and supply shocks. Among the shocks that occurred after June 2014, the most influential shock resembles a negative shock to the demand for oil associated with a weakening economy in December 2014. In contrast, there is no evidence of any large positive oil supply shocks between June and December. We conclude that the difference in the evolution of the price of oil, which declined by 44% over this period, compared with other commodity prices, which on average only declined by about 5%-15%, reflects oil-market specific developments that took place prior to June 2014.
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Metadaten
Author:Christiane Baumeister, Lutz Kilian
URN:urn:nbn:de:hebis:30:3-368487
URL:http://ssrn.com/abstract=2557316
Parent Title (English):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 501
Series (Serial Number):CFS working paper series (501)
Publisher:Center for Financial Studies
Place of publication:Frankfurt, M.
Document Type:Working Paper
Language:English
Year of Completion:2015
Year of first Publication:2015
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2015/02/11
Issue:January 24, 2015
Pagenumber:38
Last Page:34
HeBIS PPN:356495973
Institutes:Wirtschaftswissenschaften
Center for Financial Studies (CFS)
Dewey Decimal Classification:330 Wirtschaft
JEL-Classification:C53 Forecasting and Other Model Applications
Q43 Energy and the Macroeconomy
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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