Examining Rational Bubbles in Oil Prices: Evidence From Frequency Domain Estimates

Authors

  • Adedoyin Isola Lawal Dept. of Accounting and Finance, Landmark University, Omu Aran, Nigeria
  • Adeniyi Olayanju
  • Afeez Adebare Salisu
  • Abiola John Asaleye
  • Olatunde Dahunsi
  • Oluwasogo Dada
  • Oluwasola Emmanel Omoju
  • Olabisi Rasheedat Popoola

Abstract

This study examined the existence of rational bubbles in oil prices by employing a frequency domain econophysics technique that have capacity to identify both explosive behaviour and bubbles in oil prices for the three largest oil future markets – WTI, Brent and OPEC basket. Our results show that the three prices experienced bubbles in four distinct periods. We attempt to provide some explanations on each of these bubbles using geopolitical, war and economic events. We equally noted that oil prices bubbles are largely influenced by the fact that oil is a major source of energy and is non-renewable. The study observed that existence of bubbles have some economic consequences such as welfare loss resulting from distortion in prices and economic instability among others. We provide some policy recommendation.Keywords: oil prices, rational bubbles, energyJEL Classifications: C22, C50, G10, G12DOI: https://doi.org/10.32479/ijeep.7463

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Published

2019-02-14

How to Cite

Lawal, A. I., Olayanju, A., Salisu, A. A., Asaleye, A. J., Dahunsi, O., Dada, O., … Popoola, O. R. (2019). Examining Rational Bubbles in Oil Prices: Evidence From Frequency Domain Estimates. International Journal of Energy Economics and Policy, 9(2), 166–173. Retrieved from https://econjournals.com/index.php/ijeep/article/view/7463

Issue

Vol. 9 No. 2 (2019)

Section

Articles

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