The 2006-2008 Oil Bubble and Beyond

Details The 2006-2008 Oil Bubble and Beyond The 2006-2008 Oil Bubble and Beyond

2008-06-06

arxiv.org/abs/0806.1170v3

Physica A 388, 1571-1576 (2009)

Economy

Quantitative Finance

General Finance

4 pages; 4 figures, discussion of the oil supply-demand view point and uncertainties

Scientific paper

10.1016/j.physa.2009.01.011

We present an analysis of oil prices in US$ and in other major currencies that diagnoses unsustainable faster-than-exponential behavior. This supports the hypothesis that the recent oil price run-up has been amplified by speculative behavior of the type found during a bubble-like expansion. We also attempt to unravel the information hidden in the oil supply-demand data reported by two leading agencies, the US Energy Information Administration (EIA) and the International Energy Agency (IEA). We suggest that the found increasing discrepancy between the EIA and IEA figures provides a measure of the estimation errors. Rather than a clear transition to a supply restricted regime, we interpret the discrepancy between the IEA and EIA as a signature of uncertainty, and there is no better fuel than uncertainty to promote speculation!

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