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Forecasting the Price of Oil
TLDR
In this article, the authors address some of the key questions that arise in forecasting the price of crude oil and evaluate the sensitivity of a baseline oil price forecast to alternative assumptions about future demand and supply conditions.Abstract:
We address some of the key questions that arise in forecasting the price of crude oil. What do applied forecasters need to know about the choice of sample period and about the tradeoffs between alternative oil price series and model specifications? Are real or nominal oil prices predictable based on macroeconomic aggregates? Does this predictability translate into gains in out-of-sample forecast accuracy compared with conventional no-change forecasts? How useful are oil futures markets in forecasting the price of oil? How useful are survey forecasts? How does one evaluate the sensitivity of a baseline oil price forecast to alternative assumptions about future demand and supply conditions? How does one quantify risks associated with oil price forecasts? Can joint forecasts of the price of oil and of U.S. real GDP growth be improved upon by allowing for asymmetries?read more
Citations
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Journal ArticleDOI
The Role of Time-Varying Price Elasticities in Accounting for Volatility Changes in the Crude Oil Market
TL;DR: This article showed that both the short-run price elasticities of oil demand and of oil supply have declined considerably since the second half of the 1980s, which implies that small disturbances on either side of the oil market can generate large price responses without large quantity movements, which helps explain the latest run-up and subsequent collapse in the price of oil.
Book ChapterDOI
Forecasting the Price of Oil
TL;DR: In this article, the authors address some of the key questions that arise in forecasting the price of crude oil and evaluate the sensitivity of a baseline oil price forecast to alternative assumptions about future oil demand and oil supply conditions.
Journal ArticleDOI
Time-Varying Effects of Oil Supply Shocks on the US Economy
TL;DR: This paper investigated how the dynamic eects of oil supply shocks on the US economy have changed over time and found that a typical oil supply shock is currently characterized by a much smaller impact on world oil production and a greater eect on the real price of crude oil, but has a similar impact on US output and in-ability as in the 1970s.
Journal ArticleDOI
The role of speculation in oil markets: What have we learned so far
TL;DR: The authors found that the existing evidence is not supportive of an important role of speculation in driving the spot price of oil after 2003, and there is strong evidence that the co-movement between spot and futures prices reflects common economic fundamentals rather than the financialization of oil futures markets.
Journal ArticleDOI
Real-Time Forecasts of the Real Price of Oil
TL;DR: This paper showed that recursive vector autoregressive (VAR) models tend to have lower mean squared prediction error (MSPE) at short horizons than forecasts based on oil futures prices.
References
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Journal ArticleDOI
Explaining Fluctuations in Gasoline Prices: A Joint Model of the Global Crude Oil Market and the U.S. Retail Gasoline Market
TL;DR: In this article, the authors explore the implications of a joint VAR model of the global market for crude oil and the U.S. market for motor gasoline, and make explicit the relationship between demand and supply shocks in these two markets.
Journal ArticleDOI
A consistent test for nonlinear out of sample predictive accuracy
TL;DR: The authors proposed an integrated conditional moment type predictive accuracy test that is similar in spirit to that developed by Bierens and Ploberger (Econometrica 65 (1997) 1129).
ReportDOI
Three Epochs of Oil
Abstract: 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.
Journal ArticleDOI
Robustifying Forecasts from Equilibrium-Correction Systems.
TL;DR: In this article, the authors explain the empirical success of second-differenced devices and of model transformations based on additional differencing as reducing forecast error biases, at some cost in increased forecast-error variances.