Summary
A number of authors have claimed that the strong upward movement in
commodity prices since 2000 represents the early phase of a "supercycle" (SC)
driven by the sustained rise in demand associated with industrialization and
urbanization in Brazil, Russia, India, and China (BRIC). Cuddington and Jerrett
(2008) provide statistical evidence on the presence of SCs in metals prices,
defining SCs as cyclical components between 20 and 70 years (trough to trough)
by use of the assymetric Christiano-Fitzgerald (ACF) band-pass filter
(BPF).
The purpose of this paper is to address this question: Is there evidence of
SCs in crude-oil prices? On one hand, one might expect the strong demand
associated with industrialization and urbanization to affect energy prices in a
way that is roughly similar to that for metals, as both are nonrenewable
resources. On the other hand, the structure of the crude-oil market is quite
different from that in other mineral markets, and that structure has changed
rather dramatically over time.
Our empirical analysis suggests that there is strong evidence of SCs in oil
prices in the post-World War II (WWII) period, and their timing closely matches
the SC timing in metals. It appears that the global economy is currently in an
expansionary phase of an SC that started from a trough in 1996. For the
pre-WWII period on the other hand, the evidence for oil-price SCs is weak.
Possible explanations are: (1) oil was economically less important during
European and North American industrialization episodes; (2) pervasive US
regulation; (3) large supply-side shocks caused by new discoveries (e.g., in
east Texas and later in the Middle East); and (4) periods of oligopolistic
price-setting behavior.
© 2012. Society of Petroleum Engineers
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History
- Original manuscript received:
12 November 2011
- Meeting paper published:
31 October 2011
- Revised manuscript received:
22 March 2012
- Manuscript approved:
1 June 2012
- Published online:
5 July 2012
- Version of record:
13 July 2012
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