Understanding the Decline in the Price of Oil since June 2014

By Christiane Baumeister, Lutz Kilian. Journal of the Association of Environmental and Resource Economists, 2016

120 citations recorded by the source corpus.

There has been much interest in the causes of the steep decline in the Brent price of oil between June and December 2014. Our analysis shows that more than half of this decline was predictable in real time as of June 2014. We attribute $11 of this predictable decline to the cumulative effects of negative demand shocks prior to July 2014 which can be traced to a slowing global economy. The remaining $16 of the predictable decline is due to positive shocks to current and expected oil production prior to July 2014. The rest of the $49 cumulative decline was unpredictable and reflected a shock to oil price expectations in July 2014 which lowered the demand for oil inventories and a negative demand shock caused by an unexpected weakening of the global economy in December 2014. These two shocks lowered the price by an additional $9 and $13, respectively.

Subfields: Economics and Econometrics, Renewable Energy, Sustainability and the Environment

View Paper: https://www.semanticscholar.org/paper/ad5bc4adc20a33cc6a608f0b73ab97e292b1e797

Citations in the corpus

• Oil price elasticities and oil price fluctuations (2016, unknown): “…the vertical bars and the black line in the upper-left panel of figure 9 shows that about 30 percent of the decline in oil prices was actually predictable, as it reflected the cumulative effects of earlier shocks, slightly smaller than the 50 percent value found by Baumeister and Kilian (2016b).”
• Anticipation, Tax Avoidance, and the Price Elasticity of Gasoline Demand (2015, unknown): “Baumeister and Kilian (2015) provide evidence that the U.”