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The global price of oil, QE and the US high yield rate

Author

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  • Anastasios Malliaris
  • Mary E. Malliaris

Abstract

Purpose - Quantitative easing (QE) allowed the US economy to stabilize and return to slow growth. Oil prices increased to $100 during 2010–2013. Then in June 2014, they plunged again dramatically to $40. The purpose of this paper is to develop and test a model that describes the price of oil as depending on six inputs: Federal assets accumulated by the Federal Reserve during the period of QE, the 10-Year Treasury note rate, the price of copper, the trade-weighted dollar, the S&P 500 Index and the US high yield rate for bonds rated CCC or below. Design/methodology/approach - We use 771 overlapping 52-week regressions to capture short-run oil price dynamics. Findings - We find that QE was statistically significant only during 2009–2010, while the US high yield rate played a more significant role, both during and after the crisis. Research limitations/implications - This paper does not explain the behavior of oil prices prior to 2003. Practical implications - This paper emphasizes the role of the high yield rate on fracking technology in financing the extraction and production of oil. Originality/value - The paper has both the theoretical value for researchers in the area of energy, as well as practical application for the oil industry.

Suggested Citation

  • Anastasios Malliaris & Mary E. Malliaris, 2020. "The global price of oil, QE and the US high yield rate," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 47(7), pages 1849-1860, April.
    • Handle: RePEc:eme:jespps:jes-01-2020-0025
    DOI: 10.1108/JES-01-2020-0025
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    Citations

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    Cited by:

    1. Ramaprasad Bhar & Anastasios G. Malliaris & Mary Malliaris, 2021. "What Has Driven the U.S. Monthly Oil Production Since 2009? Empirical Results from Two Modeling Approaches," JRFM, MDPI, vol. 14(2), pages 1-11, February.
    2. Popkova, Elena G. & Bogoviz, Aleksei V. & Lobova, Svetlana V. & DeLo, Piper & Alekseev, Alexander N. & Sergi, Bruno S., 2023. "Environmentally sustainable policies in the petroleum sector through the lens of industry 4.0. Russians Lukoil and Gazprom: The COVID-19 crisis of 2020 vs sanctions crisis of 2022," Resources Policy, Elsevier, vol. 84(C).
    3. Anastasios G. Malliaris & Mary Malliaris, 2021. "What Microeconomic Fundamentals Drove Global Oil Prices during 1986–2020?," JRFM, MDPI, vol. 14(8), pages 1-13, August.

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