I evaluate the degree to which local supply/demand conditions and exchange rates affect the price for WTI and Brent and their price spread by estimating cointegrating vector autoregression (CVAR) models and using a saturation indicator technique to identify periods when these long- and short-run relations change. A bivariate CVAR model that includes the price of…
Tag: Oil prices
Geopolitics and the Oil Price Cycle – An Introduction
Oil prices experienced record volatility in the spring of 2020 amid two separate, but simultaneous shocks—the largest singular, sudden drop in oil demand in history amid lockdowns across the world to slow the spread of the COVID-19 pandemic and a brief oil price war among the world’s largest oil producers. The gyration was the latest…
The Coupled Cycles of Geopolitics and Oil Prices
We analyze the coupled cycles of Middle-East geopolitical violence and oil prices. Building on earlier work that shows that low oil prices are regularly followed by geopolitical strife, and that the latter is usually followed by higher oil prices, due to actual or feared disruption in oil supply, we focus in this paper on one…