International Review of Environmental and Resource Economics > Vol 14 > Issue 2-3

Five Decades of Modeling Oil Price Shocks: A Critical Review

Mikidadu Mohammed, Department of Economics & Business Administration, Austin College, USA,
Suggested Citation
Mikidadu Mohammed (2020), "Five Decades of Modeling Oil Price Shocks: A Critical Review", International Review of Environmental and Resource Economics: Vol. 14: No. 2-3, pp 241-297.

Publication Date: 20 Oct 2020
© 2020 M. Mohammed
Econometric models,  Robust estimation,  Simultaneous equation models,  Time series analysis,  Industrial organization,  Economic Theory,  Demand response,  Storage,  Energy risk management, instruments and trading,  Derivatives,  Financial markets,  Information systems development,  Information systems research methods,  International business,  International political economy
JEL Codes: E31E32Q41Q43
Oil price shocksoil marketsstructural VARfinancial speculation


Download article
In this article:
1. Introduction 
2. Supply and Demand Shocks 
3. The Role of Financial Speculation in Oil Futures Markets and Other Shocks 
4. Oil Price Shocks in Recent Empirical Literature 
5. Bibliometric Analysis of Papers in the Oil Shocks Literature 
6. Unresolved Methodological Issues and Data Concerns 
7. Conclusion 


After five decades of modeling oil price shocks, their causes and repercussions remain a question of considerable interest, both in the academic literature and the policy domain. This paper critically reviews the leading explanations of the underlying causes of oil price shocks since the 1970s. Specifically, it is intended to provide insights into the theoretical, methodological, and empirical milestones together with unresolved issues from both a historical and exploratory viewpoint. The paper also provides and discusses pathways to overcome some of the unresolved issues to aid future model formulations and policy prescriptions.