On Oil Price Shocks: The Role of Storage
Building on recent work on the role of speculation and inventories in oil markets, the paper embeds a competitive oil storage model within a DSGE model of the U.S. economy. This enables us to formally analyze the impact of a (speculative) storage demand shock and to assess how the effects of various demand and supply shocks change in the presence of oil storage facility. The paper finds that business-cycle-driven oil demand shocks are the most important drivers of U.S. oil price fluctuations during 1982–2007. Disregarding the storage facility in the model causes a considerable upward bias in the estimated role of oil supply shocks in driving oil price fluctuations. The results also confirm that a change in the composition of shocks helps explain the resilience of the macroeconomic environment to the oil price surge after 2003. Finally, speculative storage is shown to have a mitigating or amplifying role depending on the nature of the shock.
Year of publication: |
2012
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Authors: | Unalmis, Deren ; Unalmis, Ibrahim ; Unsal, Derya Filiz |
Published in: |
IMF Economic Review. - Palgrave Macmillan, ISSN 2041-4161. - Vol. 60.2012, 4, p. 505-532
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Publisher: |
Palgrave Macmillan |
Saved in:
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