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Oil price regimes and their role in price diversions from market fundamentals


Speculative bubbles, market governance and property rights are thought to affect oil prices, but their timing and magnitude are uncertain. Here, we quantify these effects using econometric techniques that identify periods between 1938:1 and 2018:3 (denoting year:quarter) when prices strayed from the levels implied by market fundamentals. We identify nine price regimes that are associated with the Organization of the Petroleum Exporting Countries gaining control over the marginal supply of crude oil, US energy legislation, a precautionary demand shock, the Arab Spring and speculative bubbles. These bubbles raised real oil prices by US$14.31 and US$4.65 per barrel in 2007:4–2008:3 and 2010:1–2011:1, respectively, which transferred US$42.8 billion from US consumers to US oil producers and US$87.4 billion from the US economy to oil exporting nations. Conversely, some sharp changes, such as the price decline associated with the Asian financial crisis, can be explained by market fundamentals.

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Fig. 1: Modelled and observed prices under different regimes.
Fig. 2: OPEC gains control over marginal supply from the TRC.
Fig. 3: Precautionary demand and Regime 4.
Fig. 4: Discussions of a speculative bubble.

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Data availability

Data on US petroleum stocks, US refinery utilization rates, prices for WTI (earlier observations from the Federal Reserve Bank of St. Louis43), OPEC production and OPEC capacity are available from US EIA (ref. 32), data for the US city average for all items are available from the US Bureau of Labor Statistics46 and the TRC demand factors are available from the Texas Railroad Commission. These data and the computer code can be obtained from authors upon reasonable request. Source data for Figs. 1–4 are provided with this paper.

Code availability

The code can be obtained from the authors upon reasonable request.


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We thank F. Pretis for his help with the R package gets. We also thank C. A. S. Hall, J. Noguera, the members of Project LINK and members of the Economics Department at the University of Victoria for comments on preliminary versions of this work. Any errors that remain are our responsibility.

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Authors and Affiliations



This project was conceived by R.K. and modified by C.C. C.C. took the lead in compiling the data used in the analysis reported in the main text; R.K. compiled the data used in the analysis reported in the Supplementary Information. C.C. took the lead in estimating the statistical models in R; R.K. adapted this code for the analyses in the Supplementary Information. R.K. took the lead in writing the manuscript and designing the figures, with significant input from C.C.

Corresponding author

Correspondence to Robert. K. Kaufmann.

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Supplementary text, Figs. 1–4, tables 1–6 and refs. 1–13.

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Kaufmann, R.K., Connelly, C. Oil price regimes and their role in price diversions from market fundamentals. Nat Energy 5, 141–149 (2020).

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