TY  - JOUR
AU  - Dvir,Eyal
AU  - Rogoff,Kenneth S.
TI  - Three Epochs of Oil
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14927
PY  - 2009
Y2  - April 2009
UR  - http://www.nber.org/papers/w14927
L1  - http://www.nber.org/papers/w14927.pdf
N1  - Author contact info:
Eyal Dvir
Department of Economics
Boston College
140 Commonwealth Ave
Chestnut Hill, MA 02467
E-Mail: dvire@bc.edu

Kenneth S. Rogoff
Thomas D Cabot Professor of Public Policy
Economics Department
Harvard University
Littauer Center 216
Cambridge, MA 02138-3001
Tel: 617-495-4022
Fax: 617/495-7730
E-Mail: krogoff@harvard.edu
AB  - We test for changes in price behavior in the longest crude oil price series available (1861-2008). We find strong evidence for changes in persistence and in volatility of price across three well defined periods. We argue that historically, the real price of oil has tended to be highly persistent and volatile whenever rapid industrialization in a major world economy coincided with uncertainty regarding access to supply. We present a modified commodity storage model that fully incorporates demand, and further can accommodate both transitory and permanent shocks. We show that the role of storage when demand is subject to persistent growth shocks is speculative, instead of its classic mitigating role. This result helps to account for the increased volatility of oil price we observe in these periods.
ER  -