A trend deduction model of fluctuating oil prices

Arbeitspapier

Crude oil prices have been fluctuating over time and by a large range. It is the disorganization of oil price series that makes it difficult to deduce the changing trends of oil prices in the middle- and long-terms and predict their price levels in the short-term. Following a price-state classification and state transition analysis of changing oil prices from January 2004 to April 2010, this paper first verifies that the observed crude oil price series during the soaring period follow a Markov Chain. Next, the paper deduces the changing trends of oil prices by the limit probability of a Markov Chain. We then undertake a probability distribution analysis and find that the oil price series have a log-normality distribution. On this basis, we integrate the two models to deduce the changing trends of oil prices from the short-term to the middle- and long-terms, thus making our deduction academically sound. Our results match the actual changing trends of oil prices, and show the possibility of re-emerging soaring oil prices.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Nota di Lavoro ; No. 22.2011

Classification and Topics

• Classification: Wirtschaft ; Energy: Demand and Supply; Prices ; Energy Forecasting ; Hypothesis Testing: General ; Econometric and Statistical Methods: Special Topics: Other ; Global Outlook ; Economic Development: Agriculture; Natural Resources; Energy; Environment; Other Primary Products
• Subject: Oil Price ; Log-normality Distribution ; Limit Probability of a Markov Chain ; Trend Deduction Model ; OPEC

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Xu, Haiyan ; Zhang, ZhongXiang
• Event: Veröffentlichung
• (who): Fondazione Eni Enrico Mattei (FEEM)
• (where): Milano
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/53184
• Last update: 10.03.2025, 11:41 AM CET