Factors behind the Price of Oil: Vector Error Correction (VEC) Analysis
Résumé
The current paper observes the factors behind the oil price. We use monthly statistics in order
to analyze the relation between Europe Brent Spot Prices, S&P 500 Futures, Gold Futures,
production of crude oil by OPEC member states, U.S. Crude Oil Rotary Rigs in operation and
Crude Oil stocks in OECD member states. The results suggest that there is a cointegration
between these variables. However, only two variables, Number of Rotary Rigs in US and Stocks
in OECD, appear significant and have a short-run causality on the price of oil. Moreover, Price
of oil (Brent), Production of OPEC and the number of Oil rigs appear to have a long-run
relation. We have also established the existence of Granger Causality between stocks of crude
oil in OECD countries and the price of oil. Our study concludes that the oil production of US
and the policies of OECD member states have a significant impact on the oil price.