Document Type

Article

Publication Date

11-2011

Publication Title

Energy Economics

Volume

33

Issue

6

Pages

1049-1054

Abstract

Oil prices increased dramatically during 2004–2006. Industry experts initially attributed these price increases to fundamental factors such as the rise in global demand, but also because of disruptions in the supply of oil. The price increases however were so substantial that additional factors are needed to explain such dramatic changes. We propose that the decline in the value of the U.S. dollar measured both by the appreciation of the Euro and of gold prices, played an important role as oil suppliers demanded compensation for the declining value of the dollar. Using a Markov switching regime methodology we find evidence that this hypothesis is true prior to the financial crisis, but its validity does not hold after the crisis when oil prices crashed and the dollar rallied.

Comments

Author Posting. © Elsevier B.V. 2011. This is the author's version of the work. It is posted here by permission of Energy Economics for personal use, not for redistribution. The definitive version was published in Energy Economics, vol. 33, no. 6, 2011, http://www.sciencedirect.com/science/article/pii/S0140988311000363

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Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.

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