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Large Oil Shocks and the US Economy: Infrequent Incidents with Large Effects

Marc Gronwald

Year: 2008
Volume: Volume 29
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol29-No1-7
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Abstract:
This paper considers the macroeconomics of the oil price for the United States. It investigates the impact of large oil price hikes in a standard VAR framework by introducing a new Markov switching based oil price specification. The explanatory power of this new specification is compared to that of a number of prominent non-linear specifications. The key findings are: (1) the new oil price specification is appropriate in both empirical and theoretical terms and allows for a well-founded distinction between �large� and �normal� oil price increases. (2) The observed impact of oil price shocks on real GDP growth is largely attributable to no fewer than three large oil price increases, namely those of 1973-74, 1979 and 1991, while variables such as consumer and import prices are also affected by normal oil price increases.



Turkish Straits and an Important Oil Price Benchmark: Urals

Duygu Ekin Ayasli, Yeliz Yalcin, Serkan Sahin, and M. Hakan Berument

Year: 2023
Volume: Volume 44
Number: Number 4
DOI: 10.5547/01956574.44.4.daya
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Abstract:
The Turkish Straits is one of the busiest waterways in the World. Around 4% of the world's crude oil trade passes through the Turkish Straits. We model the CIF Mediterranean price of Urals crude, one of the world's most critical medium gravity crude brands that passes through the Turkish Straits. The empirical evidence provided here suggests that congestion (measured in terms of the waiting time for entering the Turkish Straits) increases the CIF Mediterranean price of Urals crude up to 5.05% and 3.09% for the İstanbul and Çanakkale straits, respectively. However, similar supporting evidence could be found for neither an important benchmark oil (Brent) nor Iranian Light, which has similar characteristics and can be considered a close substitute for Urals crude in the Mediterranean refinery market. This shows that the Turkish Straits have an important impact on the price of this important medium crude oil in world oil markets.





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