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This paper studies oil market and other macroeconomic shocks in a structural vector autoregression with sign restrictions. It introduces a new indicator for oil demand, and uniquely, performs a sign restriction set-up with a penalty function approach in an oil market vector autoregression. The model also allows for macroeconomic shocks in the US. The results underline the importance of the source of an oil shock for its macroeconomic consequences. Oil supply shocks have been less relevant in driving real oil prices, and had less of an e¤ect on US in ‡ation than demand shocks. Overall, the e¤ects of oil shocks on US real activity have been relatively limited, as also highlighted by a counterfactual experiment of recent oil market developments.

This paper studies the existence of risk premiums in crude oil futures prices with simple regression and Bayesian vector autoregressive models. It also studies the importance of three main risk premiums models in explaining and forecasting the risk premiums in practice. While the existence of the premiums and the validity of the models can be established at certain time points, it turns out that the choice of sample period has a considerable effect on the results. Hence, the risk premiums are highly time-varying. The study also establishes a model, based on speculative positions in the futures markets, which has some predictive power for future oil spot prices.OPEC Energy Review December 2011