Fracking, Wars and Stock Market Crashes: The Price of Oil During the Great Recession

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Abstract

This study analyses how oil prices have been affected by three types of events that took place during the Great Recession: the development of fracking, wars in Libya, Syria and Ukraine and the stock market crash of 2008. To do this, we employ co-integration analysis, using a vector error correction model (VECM) for a period spanning August 2007 to August 2016. The principal results obtained are: firstly, that including a variable to represent the increase in production associated to fracking in the US improves the model's long term estimation, as it embraces a new variable co-integrated in the long term; secondly, that the wars in Libya and Ukraine only influenced prices indirectly, insofar as the former sparked a reduction in OPEC production and the latter an increase in OECD oil reserves, both short term; and thirdly, that the stock market crash of 2008 led to a short- term reduction in oil prices.Keywords: Great Recession, oil prices, fracking, stock market crash, war.JEL Classifications: Q4, Q43

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Author Biographies

Antonio J. Garzón, University of Seville

PhD Student, Department of Economy and Economic History

Luis Á. Hierro, University of Seville

Professor, Department of Economy and Economic History

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Published

2018-03-20

How to Cite

Garzón, A. J., & Hierro, L. Á. (2018). Fracking, Wars and Stock Market Crashes: The Price of Oil During the Great Recession. International Journal of Energy Economics and Policy, 8(2), 20–30. Retrieved from https://econjournals.com./index.php/ijeep/article/view/5936

Issue

Vol. 8 No. 2 (2018)

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Articles

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