Drivers of the oil price : an empirical analysis of the effect of oil imports by OECD regions

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2013
Güneyligil, Ümmügülsüm
This study analyzes the effect of oil imports by OECD regions on crude oil price by using Kaufmann’s price rule as a benchmark. Using the autoregressive distributed lag (ARDL) cointegration approach; it is found that there is cointegration between crude oil prices, days of forward consumption of OECD crude oil stocks, OPEC quota, OPEC cheat and key variables imported crude oil by OECD. However, ARDL based error correction models (ECM) indicate that regional factors are not a significant determinant of crude oil price both in the short run and long run. Cointegration is also found when imported crude oil by total OECD is replaced with regional variables. For the model with OECD total, there is a significant positive long run relation between imported crude oil by OECD and crude oil prices. So, the role of OECD on world price is still important even if it experiences much lower oil demand growth compared to emerging countries. Moreover, in order to capture the dynamic responses, a vector autoregressive (VAR) methodology has been employed. The results show that imported crude oil by OECD in previous quarter; affects crude oil price more than imported crude oil in the present which proves imported crude oil by OECD in previous period has more driving power on the determination of oil price than imported crude oil by OECD in present period because price might be a late responser. And based on the graphs of impulse response functions (IRF), it is found that crude oil price does not response significantly to a shock in imported crude oil by OECD and vice versa.
Citation Formats
Ü. Güneyligil, “Drivers of the oil price : an empirical analysis of the effect of oil imports by OECD regions ,” M.S. - Master of Science, 2013.