Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5089402 | Journal of Banking & Finance | 2013 | 21 Pages |
What is the role of financial speculation in determining the real oil price? We find that while macroeconomic shocks have been the main real oil price upward driver since mid-1980s, financial shocks have sizably contributed since early 2000s as well, and at a much larger extent since mid-2000s. Even though financial shocks contribute 44% out of the 65% real oil price increase over the period 2004-2010, the third oil price shock is a macro-finance episode: macroeconomic shocks actually largely account for the 2007-2008 oil price swing. While we then find support to the demand side view of real oil price determination, we however also find a much larger role for financial shocks than previously noted in the literature.
⺠We assess the contribution of financial speculation to real oil price determination. ⺠We find that macroeconomic shocks are the main oil price driver since mid-1980s. ⺠Financial shocks also matter since mid-2000s, more than previously noted. ⺠This is consistent with the progressive financialization of the oil futures market. ⺠The third oil price shock is however a macro-finance episode.