Economic and financial aspects of crude oil markets

The Role of Market Speculation in Rising Oil Prices: the large oil price fluctuations occurred from 2003 to 2008 has raised many questions about their causes. Many empirical studies have attempted to understand how oil price fluctuations are driven by changes in both market fundamentals and speculative pressures. In this regard, some problems arise such as: the use of unreliable data like the global level of inventories or the specification of a vast number of arbitrary restrictions for the models. In this study I try to isolate, coherently with the view of Knittel and Pindyck(2016) and inspired by Kilian's works, the speculative effect on the short-term spot price fluctuations determined by structural forward-looking behavioral shocks produced in the futures market. Exploiting a dataset used in Kilian and Murphy (2012), CFTC data (period 1999M1-2008M6) and taking advantage of the standard theory of storage we will be able to verify, with a Blanchard-Quah structural approach, that the impact of these shocks is remarkable but not the prevalent one in magnitude. Instead, it would seem that speculative inventory holdings may have played a much more important role.The study named "European Energy Security: the Substitutability of European Crude Oil Imports from Russia" is meant to be a contribution to the current debate on the diversification possibilities in EU for reducing the dependency on Russian crude oil and ensuring the energy security of the European Union (EU). We focus on the aggregate demand for crude oil in EU with the aim of investigating the degree of substitutability of crude oil imports from the Former Soviet Union countries (FSU) and crude oil imports from four alternative regions (America, Middle East, Europe, Africa). Following Fuss (1977) and Serletis (2010) we employ an econometric model of intra-fuel substitution, using a nonlinear seemingly unrelated regression (SUR) estimator, to assess the aforementioned degree of substitutability in terms of Morishima elasticities of substitution. We use the most recent dataset, published by the European Commission, consisting of a collection of imported volumes and CIF prices of crude oil by country of origin. The results indicate that the crude oil provided by former Soviet Union (FSU) countries is strongly substitutable with those imported from African and Middle Eastern countries whilst it is not substitutable with those imported from European and American countries.Predictability Information Criterion for Selecting Stochastic Pricing Models: pricing models of derivative instruments usually fail to provide reliable results when risks rise and financial crises occur. More advanced stochastic pricing models try to improve the fitting results adding risk factors and/or parameters to the models, incurring the risk of overfitted results. Drawing on these observations, it is proposed a generalization of the Akaike Information Criterion (AIC) suitable to evaluate forecasting power of alternative stochastic pricing models for any fixed arbitrary forecasting time-horizon. The Predictability Information Criterion (PIC) differs from the classical criteria for evaluating statistical models as it assumes that the random variable to study can (or cannot) be partially predictable, which makes it particularly suitable for studying stochastic pricing models coherently with the semimartingale definition of the price process. On the basis of this assumption the criterion measures and compares the uncertainty of the predictions of two different alternative models when prices are (or are not) predictable. We conclude with a focus on the crude oil market by comparing GBM and OU stochastic processes that are commonly used for modeling West Texas Intermediate (WTI) oil spot price returns in derivative pricing models