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The oil trading markets, 2003--10: analysis of market behaviour and possible policy responses

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  • Adair Turner
  • Jon Farrimond
  • Jonathan Hill

Abstract

This paper considers price movements in the oil markets between 2003 and 2010 and seeks to explain the significant trends in this period. It notes that the oil market is by its very nature inherently volatile because of the nature of oil as a storable and exhaustible resource and the influence of geopolitical factors on price. It concludes that fundamentals continue to anchor the market, but that speculative investment flows may bring about temporary departures from equilibrium. It is proposed that the type of volatility that matters most macroeconomically is medium-term price trends. The paper then discusses possible policy actions that could prevent or mitigate such trends, concluding that proposals solely related to the operation of the financial markets will not address the fundamental drivers of instability. It may, however, be useful to consider policies aimed at stabilizing the market, but these must be rooted in developed consumer--producer dialogue. Copyright 2011, Oxford University Press.

Suggested Citation

  • Adair Turner & Jon Farrimond & Jonathan Hill, 2011. "The oil trading markets, 2003--10: analysis of market behaviour and possible policy responses," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 27(1), pages 33-67, Spring.
    • Handle: RePEc:oup:oxford:v:27:y:2011:i:1:p:33-67
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    File URL: http://hdl.handle.net/10.1093/oxrep/grr008
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    Citations

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    Cited by:

    1. Michele Ruta & Anthony J. Venables, 2012. "International Trade in Natural Resources: Practice and Policy," Annual Review of Resource Economics, Annual Reviews, vol. 4(1), pages 331-352, August.
    2. Raghavan, Mala, 2020. "An analysis of the global oil market using SVARMA models," Energy Economics, Elsevier, vol. 86(C).
    3. Chiarucci, Riccardo & Loffredo, Maria I. & Ruzzenenti, Franco, 2017. "Evidences for a structural change in the oil market before a financial crisis: The flat horizon effect," Research in International Business and Finance, Elsevier, vol. 42(C), pages 912-921.
    4. Klepper, Rainer, 2011. "Energie in der Nahrungsmittelkette," Arbeitsberichte aus der vTI-Agrarökonomie 06/2011, Johann Heinrich von Thünen Institute, Federal Research Institute for Rural Areas, Forestry and Fisheries.
    5. Kym Anderson & Signe Nelgen, 2012. "Agricultural trade distortions during the global financial crisis," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 28(2), pages 235-260, SUMMER.
    6. Vivian, Andrew & Wohar, Mark E., 2012. "Commodity volatility breaks," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(2), pages 395-422.
    7. Franco Ruzzenenti, 2015. "Changes in the relationship between the financial and real sector and the present economic financial crisis: study of energy sector and market," Working papers wpaper105, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    8. Franco Ruzzenenti & Andreas A. Papandreou, 2015. "Effects of fossil fuel prices on the transition to a low-carbon economy," Working papers wpaper89, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.

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