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Do demand and supply shocks explain USA's oil stock fluctuations?

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  • Hayat, Aziz
  • Narayan, Paresh Kumar

Abstract

In this paper using historical monthly data on the US oil stocks (Crude Oil and Petroleum Products Ending Stock-coppes), industrial production, energy use for transportation, oil production, and oil imports, we examine whether supply and demand shocks explain the apparent decline in the volatility of the growth of COPPES since about the mid-1980s. We find that nearly 70% of the variation in the US COPPES growth is explained by its supply and demand factors, each sharing about half of this variation. This is on account of sharp decline in the contribution of persistence to the US COPPES growth variation from about 47% in the pre-break period to about 17% in the post-break period. This reduction is taken up by increased contribution of demand and supply factors since mid 1980s, of which growth variances have declined on net since then. This in turn contributes to the stability of the US COPPES growth fluctuations.

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  • Hayat, Aziz & Narayan, Paresh Kumar, 2011. "Do demand and supply shocks explain USA's oil stock fluctuations?," Applied Energy, Elsevier, vol. 88(8), pages 2908-2915, August.
    • Handle: RePEc:eee:appene:v:88:y:2011:i:8:p:2908-2915
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    References listed on IDEAS

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    1. Bénédicte Vidaillet & V. d'Estaintot & P. Abécassis, 2005. "Introduction," Post-Print hal-00287137, HAL.
    2. Narayan, Paresh Kumar & Narayan, Seema, 2007. "Modelling oil price volatility," Energy Policy, Elsevier, vol. 35(12), pages 6549-6553, December.
    3. Hamilton, James D, 1983. "Oil and the Macroeconomy since World War II," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 228-248, April.
    4. Hayat, Aziz & Narayan, Paresh Kumar, 2010. "The oil stock fluctuations in the United States," Applied Energy, Elsevier, vol. 87(1), pages 178-184, January.
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    Cited by:

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    2. Kang, Wensheng & Ratti, Ronald A. & Vespignani, Joaquin L., 2017. "Oil price shocks and policy uncertainty: New evidence on the effects of US and non-US oil production," Energy Economics, Elsevier, vol. 66(C), pages 536-546.
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    4. Thuraisamy, Kannan S. & Sharma, Susan Sunila & Ali Ahmed, Huson Joher, 2013. "The relationship between Asian equity and commodity futures markets," Journal of Asian Economics, Elsevier, vol. 28(C), pages 67-75.
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    8. Ewing, Bradley T. & Kang, Wensheng & Ratti, Ronald A., 2018. "The dynamic effects of oil supply shocks on the US stock market returns of upstream oil and gas companies," Energy Economics, Elsevier, vol. 72(C), pages 505-516.

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