European Business Schools Librarian's Group
ESSEC Working Papers,
ESSEC Research Center, ESSEC Business School
No DR 07020: Physical Market Determinants of the Price of Crude Oil and the Market Premium
Guillaume Chevillon () and Christine Rifflart ()
Additional contact information
Guillaume Chevillon: ESSEC Business School, Postal: Avenue Bernard Hirsch - B.P. 50105, 95021 CERGY-PONTOISE Cedex , FRANCE,
Christine Rifflart: Sciences-Po Center for Economic Research (OFCE) and National Political Science Foundation, Postal: 69, quai d'Orsay , 75007 PARIS, FRANCE
Abstract: We analyze the physical, i.e. non financial, determinants of the real price of crude oil by means of an equilibrium correction model over the last two decades. We find that two cointegrating relations affect the change in prices: one refers to OPEC's cartel behavior attempting to control prices using its market power and quotas; the other to the coverage rate of expected future demand by OECD using inventory behaviours. We derive an equation for the change in oil prices which we use to assess the speculative elements of the early millennium price hike. We show that worries alien to the physical markets are the causes of the increase in oil prices and are able to quantify their impact.
Keywords: Cointegration; Forecast; Market Premium; Oil Price
24 pages, June 2007
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