Top

Zeitschrift für Energiewirtschaft

Published in:

01-06-2011

Oil Price Formation: Measuring Economic and Political Factors

Author: Sascha Patrick Meßmer

Published in: Zeitschrift für Energiewirtschaft | Issue 2/2011

Activate our intelligent search to find suitable subject content or patents.

search-config

AI-assisted search

Off

Abstract

In this article the different factors which influence the oil price are introduced and tested for their influence on two crudes, namely Arab Light and Bonny Light, a Saudi Arabian and a Nigerian crude respectively in the time period between 1990 and 2004. It is argued that in accordance with Efficient Market Hypothesis the decisions made by investors on different oil markets are incorporating publically available information into prices. This information is represented by events, with a focus on international political events, but also OPEC-decisions, development of the US-Dollar, and catastrophes. The analysis is accomplished by using the method of Time Series Analysis. This tool allows for testing the influence on the mean as well as the variance of oil price returns. The results show a startlingly low influence of OPEC-decisions, a strong influence of the US-Dollar, a strong influence of catastrophes in oil-producing countries on the volatility, a relationship between the location where a political event takes place and its impact on crude oil returns, as well as a rising influence of terrorism on oil.

next article The Impact of the Financial Crisis on the Global Seaborne Hard Coal Market: Are there Implications for the Future?

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

Zeitschrift für Energiewirtschaft

Zeitschrift für Energiewirtschaft (ZfE) ist eine unabhängige Fachzeitschrift mit aktuellen Themen zu Energiewirtschaft, Energiepolitik und Energierecht. JETZT BESTELLEN

inform now

Springer Professional "Technik"

Online-Abonnement

Mit Springer Professional "Technik" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 390 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Maschinenbau + Werkstoffe

Jetzt Wissensvorsprung sichern!

inform now

Information, which could influence the demand-side, would be a competitive alternative for crude oil.

Why the independent variable is oil price returns instead of the oil price, will be explained in Sect. 3.

Thankfully the data was provided by OPEC.

http://gking.harvard.edu/events/ [01.12.2010].

The amount of damage is coded as follows: 1 for an amount of 10.000 $ or lower, 2 for an amount of 100.000 $ or lower, 3 for an amount of 1.000.000 $ or lower, 5 for values higher than 1.000.000 $ and a 9 for an amount not known.

http://www.opec.org/opec_web/static_files_project/media/downloads/data_graphs/ProductionLevels.pdf [22.10.2010].

http://www.eia.doe.gov/ipm/supply.html [01.12.2010].

Note, that e.g. an OPEC-meeting could be related to the beginning of any conflict, as a reaction to this event, any treaty between two oil producing firms could be, too, however, this could be also coincidence and then, it would not be related.

Note that it is dealt with highly variable data here. Obtaining data for e.g. storage levels on a daily base is rather difficult.

This differentiation between variance and mean equation is crucial. It means that some event which has an effect on a variable can be measured in two ways: (I) the variable has a short-time effect on the mean of the returns, (II) it has an effect on the volatility in a longer term. The effect of catastrophes as well as of LIBOR was tested on the mean and on the variance equation. E.g. for catastrophes the effect on the variance equation was significant while it was not on the mean equation. This is understandable because catastrophes should raise uncertainty rather than having a direct effect on the mean.

Adelman MA (2002) World oil production and prices. Q Rev Econ Finance 42:169–191 CrossRef

Banks FE (1992) Economic theory and the crude oil futures market: a summing up. Working paper series. Uppsala University, p 15

Blank JE (1992) Staaten und Strategien auf dem Weltölmarkt. In: Wirtschaftswissenschaftliche Diskussionsbeiträge, No V-87-92

Bürger C, Weber B (2011) Neurofinance – Geldverarbeitung im Gehirn. In: Reimann M, Weber B (eds) Neuroökonomie: Grundlagen – Methoden – Anwendungen. Gabler, Wiesbaden

De Santis RA (2000) Crude oil price fluctuations and Saudi Arabian. behaviour. Kiel working papers, No 1014

Engle RF (1982) Autoregressive conditional heteroscedasticity with estimates of the variance of United Kingdom inflations. Econometria 50:987–1007 MathSciNetMATHCrossRef

Falola T, Genova A (2005) The politics of the global oil industry. Praeger Publishers, Westport

Foster AJ (1996) Price discovery in oil markets: a time varying analysis of the 1990–1991 Gulf conflict. Energy Econ 18:231–246 CrossRef

Goldstein JS (1992) A conflict-cooperation scale for WEIS events data. J Confl Resolut 36:369–385 CrossRef

Hotelling H (1931) The economics of exhaustible resources. J Polit Econ 39(2):137–175 MathSciNetCrossRef

Hubbert MK (1949) Energy from fossil fuels. Science 109(2823):103–109 CrossRef

Kahneman D, Tversky A (1979) Prospect theory: an analysis of decision under risk. Econometria 47:263–292 MATHCrossRef

Kant I (1996) Zum ewigen Frieden. Reclam, Stuttgart

King G, Lowe W (2003) An automated information extraction tool for international conflict data with performance as good as human coders: a rare events evaluation design. Int Organ 57:617–642 CrossRef

Lieber RJ (1992) Oil and power after the gulf war. Int Secur 17:155–176 CrossRef

Mickolus EF, Sandler T, Murdock JM, Flemming PA (2009) International terrorism: attributes of terrorist events 1968–2009. Vinyard Software, Dunn Loring

Miller M, Zhang L (1996) Oil prices hikes and development triggers in peace an war. Econ J (Lond) 106:445–457

Pirog RL (1987) Petroleum: the key energy source. In: Pirog RL, Stamos SC Jr (eds) Energy economics: theory and policy. Englewood Cliffs, Prentice Hall

Pirog RL (2005) World oil demand and its effects on oil prices, in: Congressional research paper service

Rigobon R, Sack B (2003) The effects of war risk on US financial markets. NBER working paper 9609

Rose EA (2004) OPEC’s dominance of the global oil market: the rise of the world’s dependency on oil. Middle East J 58:424–443

Shleifer A (2000) Inefficient markets—an introduction to behavioral finance. University Press, Oxford

Stock JH, Watson MW (2007) Introduction to econometrics. Pearson Education, Boston

Tsay RS (2002) Analysis of financial time series. Wiley, New York MATHCrossRef

Weiner RJ (2005) Speculation in international crises: report from the gulf. J Int Bus Stud 36:576–587 CrossRef

Yaffee R, McGee M (2000) Introduction to time series analysis and forecasting with applications of SAS and SPSS. Academic Press, San Diego MATH

Yergin D (1991) The prize: the epic quest for oil, money, and power. Simon & Schuster, New York

Title: Oil Price Formation: Measuring Economic and Political Factors
Author: Sascha Patrick Meßmer
Publication date: 01-06-2011
Publisher: Vieweg Verlag
Published in: Zeitschrift für Energiewirtschaft / Issue 2/2011
Print ISSN: 0343-5377
Electronic ISSN: 1866-2765
DOI: https://doi.org/10.1007/s12398-011-0049-x

Springer Professional

Abstract

Please log in to get access to your license.

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Zeitschrift für Energiewirtschaft

Springer Professional "Technik"

Other articles of this Issue 2/2011

Integration erneuerbarer Energien in die deutsche Stromversorgung im Zeitraum 2015–2020 mit Ausblick auf 2025

Veranstaltungen 2011

Netzausbauplanung unter Berücksichtigung probabilistischer Einflussgrößen

Erratum zu: Ökonomische Chancen der deutschen Industrie resultierend aus einer weltweiten Verbreitung von CSP (Concentrated Solar Power)-Technologien

Einfluss von HGÜ-Verbindungen auf Markt und Netz

The Impact of the Financial Crisis on the Global Seaborne Hard Coal Market: Are there Implications for the Future?