Oil Prices: Is Supply or Demand Behind the Slump?

Badel, Alejandro; McGillicuddy, Joseph

doi:10.20955/es.2015.8

Cited by 11 publications

(10 citation statements)

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“…Badel and McGillicuddy (2015) argue that during the second half of 2014, oil prices declined mostly because of negative oil-specific demand shocks-in anticipation of expected abundant oil supply-as well as aggregate demand shocks. Baumeister and Kilian (2015) report that negative demand shocks associated with the global business cycle and shocks to the demand for oil inventories contributed to the recent oil price drop.…”

Section: How Important Are Supply and Demand Shocks In Explaining Thementioning

confidence: 99%

The Great Plunge in Oil Prices: Causes, Consequences, and Policy Responses

Baffes¹,

et al. 2015

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract: Following four years of relative stability at around $105 per barrel, oil prices have declined sharply since June 2014. This paper presents a comprehensive analysis of the sources of the recent decline in prices, and examines its macroeconomic, financial and policy implications. The recent drop in prices is a significant, but not an unprecedented event as it has some significant parallels with the price collapse in 1985-86. The recent decline has been driven by a number of factors: several years of upward surprises in the production of unconventional oil; weakening global demand; a significant shift in OPEC policy; unwinding of some geopolitical risks; and an appreciation of the U.S. dollar. Although the relative importance of each factor is difficult to pin down, OPEC's renouncement of price support and rapid expansion of oil supply from unconventional sources appear to have played a crucial role since mid-2014. The oil price drop will lead to substantial income shifts from oil exporters to oil importers resulting in a net positive effect for global activity over the medium term. Although several factors could counteract its impact on global growth and inflation, the drop in oil prices will pose significant challenges for monetary, fiscal, and structural policies. JEL Classification Numbers: Q40, Q41, Q43, F40, E32, E62. Terms of use: Documents in

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Section: How Important Are Supply and Demand Shocks In Explaining Thementioning

confidence: 99%

The Great Plunge in Oil Prices: Causes, Consequences, and Policy Responses

Baffes¹,

et al. 2015

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“…The results indicated that oil demand shock, rather than oil supply shock, seemed to be the main determinant of domestic price changes in the United States (Kilian, 2009;Badel and McGillicuddy, 2015). Peersman and Van Robays (2009) used the same approach in a set of countries and reported three main outcomes.…”

Section: Accepted Manuscriptmentioning

confidence: 99%

Impact of oil price changes on domestic price inflation at disaggregated levels: Evidence from linear and nonlinear ARDL modeling

Sek

2017

Energy

105

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“…The results revealed that oil price is dominated by demand shocks. Badel and McGillicuddy [20] extended the data in Kilian [4] to January 2015 and repeated the analyses. They concluded that the role of oil supply on oil prices has been small.…”

Section: Literature Reviewmentioning

confidence: 99%

An investigation on the impacts of oil price shocks on domestic inflation: A SVAR approach

Sek

Lim

2016

AIP Conference Proceedings

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Abstract. Oil price can have influential effects on inflation as oil is used as the main source in many productions. In this paper, we perform comparative analyses on studying the impacts of oil price shocks on determining the domestic inflation in two groups of countries, i.e. oil importing versus oil exporting countries. In particular, we look into the effects of oil supply and oil demand shocks on determining the domestic inflation. A structural vector autoregressive model is used in analyzing the effects of orthogonalized shocks on inflation. A Blanchard-Quah identification is applied on the long-run impact matrix. We focus the analyses on ten oil importing and ten oil exporting countries respectively. The data ranging from 1973M1 onwards till 2015M1. Our results detect interaction effects among variables. We also observe that oil supply shock is more influential in explaining CPI inflation compared to oil demand shocks. Oil supply shock can be a determinant to inflation in oil importing countries but oil demand has very limited explanatory power on explaining inflation in most countries. Inflation in the main oil exporting countries does not respond to neither oil supply shock nor oil demand shock. The results reveal that oil dependency may determine the magnitude impact of oil supply and oil demand shocks on inflation.

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Oil Prices: Is Supply or Demand Behind the Slump?

Cited by 11 publications

References 0 publications

The Great Plunge in Oil Prices: Causes, Consequences, and Policy Responses

The Great Plunge in Oil Prices: Causes, Consequences, and Policy Responses

Impact of oil price changes on domestic price inflation at disaggregated levels: Evidence from linear and nonlinear ARDL modeling

An investigation on the impacts of oil price shocks on domestic inflation: A SVAR approach

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