Q4 - Energy

• November 17, 2016

  Commodity Price Supercycles: What Are They and What Lies Ahead?

  Bank of Canada Review - Autumn 2016 Bahattin Buyuksahin, Kun Mo, Konrad Zmitrowicz

  Because commodity prices help determine Canada’s terms of trade, employment, income and, ultimately, inflation, it is important to understand what causes them to fluctuate. Since the early 1900s, there have been four commodity price supercycles—which we define as extended periods of boom and bust that can take decades to complete. Now in its downswing phase, the current supercycle started after growth in China and other emerging-market economies in the mid-1990s resulted in an unexpected demand shock. The extent of this downswing depends on numerous factors that are presently uncertain.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Econometric and statistical methods, International topics JEL Code(s): C, C1, Q, Q1, Q4, Q41

• The Global Benefits of Low Oil Prices: More Than Meets the Eye

  Staff Analytical Note 2016-13 Robert Fay, Justin-Damien Guénette, Louis Morel

  Between mid-2014 and early 2016, oil prices fell by roughly 65 per cent. This note documents the channels through which this oil price decline is expected to affect the global economy. One important and immediate channel is through higher expenditures, especially in net oil-importing countries.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Business fluctuations and cycles, International topics, Recent economic and financial developments JEL Code(s): E, E3, E32, E37, F, F0, F01, Q, Q4, Q43

• Low for Longer? Why the Global Oil Market in 2014 Is Not Like 1986

  Staff Analytical Note 2016-11 Bahattin Buyuksahin, Reinhard Ellwanger, Kun Mo, Konrad Zmitrowicz

  In the second half of 2014, oil prices experienced a sharp decline, falling more than 50 per cent between June 2014 and January 2015. A cursory glance at this oil price crash suggests similarities to developments in 1986, when the price of oil declined by more than 50 per cent, initiating an episode of relatively low oil prices that lasted for more than a decade.

  Content Type(s): Staff research, Staff analytical notes Topic(s): International topics, Recent economic and financial developments JEL Code(s): E, E3, Q, Q4, Q41, Q43

• Crude Oil Prices and Fixed-Asset Cash Spending in the Oil and Gas Industry: Findings from VAR Models

  Staff Analytical Note 2016-8 Farrukh Suvankulov

  This note investigates the relationship between crude oil prices and investment in the energy sector. We employ a set of vector autoregression (VAR) models (unconstrained VAR, vector error-correction and Bayesian VAR) to formalize the relationship between the West Texas Intermediate (WTI) benchmark and fixed-asset cash spending in the oil and gas extraction and support activities sector of the Canadian economy.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Domestic demand and components, Econometric and statistical methods JEL Code(s): E, E2, E22, E27, Q, Q4, Q43, Q47

• A General Approach to Recovering Market Expectations from Futures Prices with an Application to Crude Oil

  Staff Working Paper 2016-18 Christiane Baumeister, Lutz Kilian

  Futures markets are a potentially valuable source of information about price expectations. Exploiting this information has proved difficult in practice, because time-varying risk premia often render the futures price a poor measure of the market expectation of the price of the underlying asset.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, International topics JEL Code(s): C, C5, C53, D, D8, D84, G, G1, G14, Q, Q4, Q43