{"title":"Modelling oil consumption in Baumeister and Hamilton’s (2019) model of the global oil market","authors":"Michał Rubaszek, Karol Szafranek","doi":"10.1016/j.econlet.2025.112216","DOIUrl":null,"url":null,"abstract":"<div><div>We propose a refinement of the imprecise approximation of the oil consumption growth rate used by Baumeister and Hamilton (2019) in their model of the global oil market. Our modification involves replacing the first difference of global oil inventories by the second difference, which denotes changes in the addition to inventory stock. Accounting for our approximation and updating the sample reduces the short-run price elasticity of oil supply and the contribution of oil supply shocks to oil price fluctuations, aligning the conclusions from the Baumeister and Hamilton’s (2019) model with the consensus in the literature that the supply elasticity is close to zero and that oil demand shocks are the most important driver of oil price fluctuations.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"248 ","pages":"Article 112216"},"PeriodicalIF":2.1000,"publicationDate":"2025-02-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Economics Letters","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0165176525000539","RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"ECONOMICS","Score":null,"Total":0}
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Abstract
We propose a refinement of the imprecise approximation of the oil consumption growth rate used by Baumeister and Hamilton (2019) in their model of the global oil market. Our modification involves replacing the first difference of global oil inventories by the second difference, which denotes changes in the addition to inventory stock. Accounting for our approximation and updating the sample reduces the short-run price elasticity of oil supply and the contribution of oil supply shocks to oil price fluctuations, aligning the conclusions from the Baumeister and Hamilton’s (2019) model with the consensus in the literature that the supply elasticity is close to zero and that oil demand shocks are the most important driver of oil price fluctuations.
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Many economists today are concerned by the proliferation of journals and the concomitant labyrinth of research to be conquered in order to reach the specific information they require. To combat this tendency, Economics Letters has been conceived and designed outside the realm of the traditional economics journal. As a Letters Journal, it consists of concise communications (letters) that provide a means of rapid and efficient dissemination of new results, models and methods in all fields of economic research.
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