Revisiting Price Volatility Behavior in the Crude Oil Market
By Thomas K. Lee, Ph.D., Senior Economist, Energy Information Administration (EIA), U.S. Department of Energy (DOE) and Member of the GCARD’s Editorial Advisory Board and John Zyren, Ph.D., Senior Industry Economist & Econometrician, EIA, U.S. DOE
This paper compares the behavior of oil price volatility during two different time horizons: 1990 to 2003 and 2004 to 2018. The paper finds that the component of oil price volatility due to current information has diminished more quickly than previously while the systematic information component of oil price volatility has persisted longer than previously. The candidate hypotheses for why price volatility conditions have changed include fundamental changes in the markets such as the shale revolution, technology advancement, and geopolitics.
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