The role of precautionary and speculative demand in the global market for crude oil.

Cross, Jamie L.; Nguyen, Bao H.; Tran, Trung Duc

Summary: Contemporary structural models of the global market for crude oil jointly specify precautionary and speculative demand shocks as a composite shock, named a storage demand shock. We resolve this identification problem and examine the effects of these distinct shocks, along with conventional demand and supply shocks, on the global price of crude oil. We find that uncertainty driven precautionary demand for crude oil is, on average, the primary driver of real price of oil fluctuations that have previously been associated with storage demand shocks. Historically, these shocks have had distinct effects on the real oil price dynamics since the 1970s.

PETROLEUM sales & prices; PETROLEUM; EXPORT marketing; STRUCTURAL models; SUPPLY & demand; PRICE fluctuations

Journal of Applied Econometrics, 2022, Vol 37, Issue 5, p882

0883-7252

Academic Journal

10.1002/jae.2905