Re: oil crises

[Aldo Balardini <054652@xxxxxxxxxxxxx>]

Doug Henwood wrote:

My guess is that there is a Marxian/Ricardian central tendency, a la
Bina, but that once oil began trading on the futures markets, its
day-to-day (and even year-to-yaer) price fluctuations are now
dominated by short-term trading considerations, like any other
financial or real commodity. OPEC is an influence, but hardly the
last word.
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Fabian:

Regarding the influence of futures market on the price of oil Horsnell and Mabro in their 1993 book "Oil Markets and Prices" write:
"There is a widely held view that volatility in oil prices has been created by the greater reliance by the oil industry on forward and futures markets for price discovery over recent years.  In fact oil prices have a long history of volatility...The period of control of prices by the seven sisters durin gthe 1950s and 1960s was the only period of stability in prices in an industry that has been prone to sharp fluctuations since its birth.  In fact the debate as to whether the presence of speculators in forward and futures markets leads to increased volatility is an old one, and there is no empirical evidence that it is the case." (pg. 171).

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I had my researcher look into the oil pricing literature and was
amazed to find that little has been published on the topic in the
last 10-15 years (unless she was looking in the wrong places, which I
doubt, because she's very good).

Doug
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Fabian:

The book cited above, by Mabro and Horsnell has in part estimulated a new literature on oil prices beginning in the early 1990s, one which concentrates on market efficiency and most importantly on price discovery.  Using time series techniques, which can be considered an advance since it "frees" analysts (to a large extent) of the dominant cartel paradigm, these authors began to investigate the causal relationships between spot and future price in the most important markets like NYMEX and London's IPE.  Another agenda of this new literature is the analysis of the comovements of different crudes' prices or markers, the crudes used as benchmarks for pricing other crudes in New York, London and Singapore.  Results so far are encouraging, providing evidence for the Marx/Ricardo's model since it has been found that spot prices determine future prices and the US marker, WTI, determines the pricing of Middle East crudes.  Of course that these results are not indentified with Marx/Ricardo's model but rather presented as simply an empirical exercise on conintegration analysis and time-series Granger-causality tests.