{"title":"Storage scarcity and oil price uncertainty","authors":"Atle Oglend , Tore Selland Kleppe","doi":"10.1016/j.eneco.2025.108393","DOIUrl":null,"url":null,"abstract":"<div><div>Recent research has shown how oil price uncertainty tends to switch endogenously between low and high volatility regimes, with high volatility regimes coinciding with declining prices (Cuñado and de Gracia 2003). This is at odds with the canonical storage model - the primary economic model of commodity price volatility. The model predicts lower volatility at lower prices. The purpose of this paper is to show how a reasonable specification of the U.S. oil market with increasing marginal storage cost and constrained storage capacity can explain the major volatility regimes in the market from 2007 to 2023. Volatility increases following negative demand shocks (or positive supply shocks) due to storage capacity becoming increasingly scarce, leading the market to price in higher uncertainty due to less flexible inventory response to supply/demand.</div></div>","PeriodicalId":11665,"journal":{"name":"Energy Economics","volume":"144 ","pages":"Article 108393"},"PeriodicalIF":14.2000,"publicationDate":"2025-03-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Energy Economics","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0140988325002178","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 0
Abstract
Recent research has shown how oil price uncertainty tends to switch endogenously between low and high volatility regimes, with high volatility regimes coinciding with declining prices (Cuñado and de Gracia 2003). This is at odds with the canonical storage model - the primary economic model of commodity price volatility. The model predicts lower volatility at lower prices. The purpose of this paper is to show how a reasonable specification of the U.S. oil market with increasing marginal storage cost and constrained storage capacity can explain the major volatility regimes in the market from 2007 to 2023. Volatility increases following negative demand shocks (or positive supply shocks) due to storage capacity becoming increasingly scarce, leading the market to price in higher uncertainty due to less flexible inventory response to supply/demand.
期刊介绍：
Energy Economics is a field journal that focuses on energy economics and energy finance. It covers various themes including the exploitation, conversion, and use of energy, markets for energy commodities and derivatives, regulation and taxation, forecasting, environment and climate, international trade, development, and monetary policy. The journal welcomes contributions that utilize diverse methods such as experiments, surveys, econometrics, decomposition, simulation models, equilibrium models, optimization models, and analytical models. It publishes a combination of papers employing different methods to explore a wide range of topics. The journal's replication policy encourages the submission of replication studies, wherein researchers reproduce and extend the key results of original studies while explaining any differences. Energy Economics is indexed and abstracted in several databases including Environmental Abstracts, Fuel and Energy Abstracts, Social Sciences Citation Index, GEOBASE, Social & Behavioral Sciences, Journal of Economic Literature, INSPEC, and more.
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