Explaining the So-Called 'Price Premium' in Oil Markets

20 Pages Posted: 17 Aug 2005

Date Written: June 2005

Abstract

This paper explores the information content of several variables on the so-called "oil price premium over fundamentals". We define this premium as the difference between the market oil price and the estimated price consistent with the OECD's relative industry stock level. By using Granger causality tests and extended regressions we test the systematic ability of a broad set of variables to explain the premium. We find that speculation in the oil market - measured by non-commercial long positions - can improve the traditional model, reducing the premium significantly during some parts of the sample.

Suggested Citation

Merino, Antonio and Ortiz, Alvaro, Explaining the So-Called 'Price Premium' in Oil Markets (June 2005). OPEC Review, Vol. 29, No. 2, pp. 133-152, June 2005, Available at SSRN: https://ssrn.com/abstract=743488

Antonio Merino

Repsol YPF

28046 Madrid
Spain
+34-91-348-81-00 (Phone)
+34-91-348-28-21 (Fax)

Alvaro Ortiz (Contact Author)

Repsol YPF ( email )

28046 Madrid
Spain
+34-91-348-81-00 (Phone)
+34-91-348-28-21 (Fax)

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