Crude oil price: Demand, supply, economic activity, economic policy uncertainty and wars: from the perspective of structural equation modelling (SEM)

Wang, Qingfeng; Sun, Xu

Abstract

We studied the relationship between the change in the price of oil and some of its determinants, using a structural equation model. The demand for oil is confirmed to be inelastic to the change in oil price during our sampling period. Economic activity is found to be the most significant factor in explaining the dynamics of oil price. Wars and political tension, among the largest oil producers and their neighbouring countries, can drive the crude oil price sharply higher, but no significant direct effect was confirmed by the SEM. The significant effects of wars and political tension on the price of oil lies in their ability to disrupt oil supplies.

Citation

Wang, Q., & Sun, X. (2017). Crude oil price: Demand, supply, economic activity, economic policy uncertainty and wars: from the perspective of structural equation modelling (SEM). Energy, 133, https://doi.org/10.1016/j.energy.2017.05.147

• Journal Article Type: Article
• Acceptance Date: May 23, 2017
• Online Publication Date: May 26, 2017
• Publication Date: Aug 15, 2017
• Deposit Date: May 25, 2018
• Publicly Available Date: May 25, 2018
• Journal: Energy
• Print ISSN: 0360-5442
• Electronic ISSN: 1873-6785
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 133
• DOI: https://doi.org/10.1016/j.energy.2017.05.147
• Keywords: Crude oil price; Wars; Economic policy uncertainty; Kilian economic index; Structural equation modelling
• Public URL: https://nottingham-repository.worktribe.com/output/878115
• Publisher URL: https://www.sciencedirect.com/science/article/pii/S0360544217309192?via%3Dihub
• Contract Date: May 25, 2018