Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics

• What Does the Convenience Yield Curve Tell Us about the Crude Oil Market?

  Staff Working Paper 2014-42 Ron Alquist, Gregory Bauer, Antonio Diez de los Rios

  Using the prices of crude oil futures contracts, we construct the term structure of crude oil convenience yields out to one-year maturity. The crude oil convenience yield can be interpreted as the interest rate, denominated in barrels of oil, for borrowing a single barrel of oil, and it measures the value of storing crude oil over the borrowing period.

  Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, International topics JEL Code(s): C, C5, C53, G, G1, G12, G13, Q, Q4, Q43
• May 13, 2014

  The Art and Science of Forecasting the Real Price of Oil

  Bank of Canada Review - Spring 2014 Christiane Baumeister

  Forecasts of the price of crude oil play a significant role in the conduct of monetary policy, especially for commodity producers such as Canada. This article presents a range of recently developed forecasting models that, when pooled together, can generate, on average, more accurate forecasts of the price of oil than the oil futures curve. It also illustrates how policy-makers can evaluate the risks associated with the baseline oil price forecast and how they can determine the causes of past oil price fluctuations.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Econometric and statistical methods, International topics JEL Code(s): C, C5, C53, E, E3, E32, Q, Q4, Q43

• Do High-Frequency Financial Data Help Forecast Oil Prices? The MIDAS Touch at Work

  Staff Working Paper 2014-11 Christiane Baumeister, Pierre Guérin, Lutz Kilian

  The substantial variation in the real price of oil since 2003 has renewed interest in the question of how to forecast monthly and quarterly oil prices. There also has been increased interest in the link between financial markets and oil markets, including the question of whether financial market information helps forecast the real price of oil in physical markets.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, International topics JEL Code(s): C, C5, C53, G, G1, G14, Q, Q4, Q43

• Do Oil Price Increases Cause Higher Food Prices?

  Staff Working Paper 2013-52 Christiane Baumeister, Lutz Kilian

  U.S. retail food price increases in recent years may seem large in nominal terms, but after adjusting for inflation have been quite modest even after the change in U.S. biofuel policies in 2006. In contrast, increases in the real prices of corn, soybeans, wheat and rice received by U.S. farmers have been more substantial and can be linked in part to increases in the real price of oil.

  Content Type(s): Staff research, Staff working papers Topic(s): Inflation and prices, International topics JEL Code(s): E, E3, E31, Q, Q1, Q11, Q4, Q42, Q43

• The Financialization of Food?

  Staff Working Paper 2013-39 Valentina G. Bruno, Bahattin Buyuksahin, Michel A. Robe

  Commodity-equity and cross-commodity return co-movements rose dramatically after the 2008 financial crisis. This development took place following what has been dubbed the “financialization” of commodity markets.

  Content Type(s): Staff research, Staff working papers Topic(s): International topics, Recent economic and financial developments JEL Code(s): G, G1, G12, G13, Q, Q1, Q11, Q13

• Forecasting the Real Price of Oil in a Changing World: A Forecast Combination Approach

  Staff Working Paper 2013-28 Christiane Baumeister, Lutz Kilian

  The U.S. Energy Information Administration regularly publishes short-term forecasts of the price of crude oil.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, International topics JEL Code(s): C, C5, C53, E, E3, E32, Q, Q4, Q43

• Are Product Spreads Useful for Forecasting? An Empirical Evaluation of the Verleger Hypothesis

  Staff Working Paper 2013-25 Christiane Baumeister, Lutz Kilian, Xiaoqing Zhou

  Notwithstanding a resurgence in research on out-of-sample forecasts of the price of oil in recent years, there is one important approach to forecasting the real price of oil which has not been studied systematically to date.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, International topics JEL Code(s): C, C5, C53, G, G1, G15, Q, Q4, Q43

• A Blessing in Disguise: The Implications of High Global Oil Prices for the North American Market

  Staff Working Paper 2013-23 Ron Alquist, Justin-Damien Guénette

  We examine the implications of increased unconventional crude oil production in North America. This production increase has been made possible by the existence of alternative oil-recovery technologies and persistently elevated oil prices that make these technologies commercially viable.

  Content Type(s): Staff research, Staff working papers Topic(s): International topics, Recent economic and financial developments JEL Code(s): Q, Q4, Q41, Q43, Q47

• What Central Bankers Need to Know about Forecasting Oil Prices

  Staff Working Paper 2013-15 Christiane Baumeister, Lutz Kilian

  Forecasts of the quarterly real price of oil are routinely used by international organizations and central banks worldwide in assessing the global and domestic economic outlook, yet little is known about how best to generate such forecasts. Our analysis breaks new ground in several dimensions.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, International topics JEL Code(s): C, C5, C53, E, E3, E32, Q, Q4, Q43

• The Effects of Oil Price Uncertainty on the Macroeconomy

  Staff Working Paper 2012-40 Soojin Jo

  This paper investigates the effect of oil price uncertainty on real economic activity using a quarterly VAR with stochastic volatility in mean. Stochastic volatility allows oil price uncertainty to vary separately from changes in the level of oil prices, and thus the impact of oil price uncertainty can be examined in a more flexible yet tractable way.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Econometric and statistical methods JEL Code(s): C, C3, C32, E, E3, E32, Q, Q4, Q43