Three Epochs of Oil / Eyal Dvir, Kenneth S. Rogoff.

Format:

Book

Author/Creator:

Dvir, Eyal.

Contributor:

National Bureau of Economic Research.

Rogoff, Kenneth S.

Series:

Working Paper Series (National Bureau of Economic Research) no. w14927.

NBER working paper series no. w14927

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2009.

Summary:

We test for changes in price behavior in the longest crude oil price series available (1861-2008). We find strong evidence for changes in persistence and in volatility of price across three well defined periods. We argue that historically, the real price of oil has tended to be highly persistent and volatile whenever rapid industrialization in a major world economy coincided with uncertainty regarding access to supply. We present a modified commodity storage model that fully incorporates demand, and further can accommodate both transitory and permanent shocks. We show that the role of storage when demand is subject to persistent growth shocks is speculative, instead of its classic mitigating role. This result helps to account for the increased volatility of oil price we observe in these periods.

Notes:

Print version record

April 2009.