A study on determination of world crude oil prices / Nurulsolehah Che Ahmad

This paper investigates the factors that determine world crude oil prices using time series data with annually data starting from 1986 to 2015. This study are using Augmented Dickey Fuller and Philips Perron test to estimate whether the data are stationary or non-stationary. Johansen co-integration and Granger causality test are also conducted to estimates long-run and short-run determinants of world crude oil price. In Johansen co-integration trace test shows that there are long-run relationship between oil price, oil supply (production), oil demand (consumption) and oil inventories. However, in Johansen co-integration maximum Eigen test shows there are no integration between variables. Granger causality estimates the short-run causes of the world crude oil prices changes. The result shows that there is bidirectional causality between Brent crude oil price and oil consumption. Meanwhile, there is unidirectional causality between crude oil price and oil production.