Explosive oil prices

Marc Gronwald* (Corresponding Author)

*Corresponding author for this work

Research output: Contribution to journalArticle

16 Citations (Scopus)
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Abstract

Spectacular oil price increases occur on a regular basis; the most
recent one is dated July 2008. This paper puts forward the notion
that extreme oil price movements of this type can be described as
temporary explosive. The paper applies a forward recursive unit root
tests and finds evidence of explosive behavior in the following periods:
1990/1991, 2005/2006, and 2007/2008. Currently existing oil
price models are not capable of appropriately describing this type of
behavior. A thorough discussion of the underlying reasons of these
price hikes indicates these oil price episodes - even though extreme -
are mainly fundamentally explained. This finding is insufficiently acknowledged
in the literature on speculative oil price bubbles. Thus,
policy interventions as response to extreme movements of this kind
need to be very carefully thought through.
Original languageEnglish
Pages (from-to)1-5
Number of pages5
JournalEnergy Economics
Volume60
Early online date16 Sep 2016
DOIs
Publication statusPublished - Nov 2016

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Keywords

  • oil prices
  • explosiveness
  • fundamentals
  • bubble
  • speculation

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