Oil prices are notoriously volatile, spiking up and down on a dime. They’re usually driven by global economic fundamentals, with growth driving up prices while slowdowns lower them. But there are also a number of other factors that can influence prices. For example, home heating demands spike during the winter in some places, putting a strain on oil supplies and sending prices up. In addition, the world’s major oil producers are governed by the Organization of Petroleum Exporting Countries (OPEC), which sets production quotas to control supply and price.
Besides the crude oil supply and demand, the financial market has an important impact on the crude oil price fluctuation. It is especially obvious in the periods before and after the financial crisis of 2008 and the overall decline of the stock market around 2015. In this paper, we use a nonlinear autoregressive distributed lag model to study the influence mechanism characteristics of different fluctuations sources at different price positions or fluctuation trends. It is found that the source structure of oil price fluctuation tends to be asymmetric, and there are differences in the long-term impact and short-term effect between the two fluctuations sources at different stages.
Despite their volatility, high or low oil prices can have serious implications. For one, they can limit investments in new energy technologies and reduce the overall potential for a shift to greener fuels. This is a concern because the oil industry provides a vital service for consumers and businesses worldwide. It is essential to the global economy.
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