Crude Oil Prices: Trends and Forecast

IMF Working Papers, May 1, 2008

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Crude Oil Prices: Trends and Forecast

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Bibliographic details

• Authors: Noureddine Krichene
• Published: May 1, 2008
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451869927.001

Summary and key findings

• Following record low interest rates and fast depreciating U.S. dollar, crude oil prices became under rising pressure and seemed boundless.
• Oil price process parameters changed drastically in 2003M5-2007M10 toward consistently rising prices.
• Short-term forecasting would imply persistence of observed trends, as market fundamentals and underlying monetary policies were supportive of these trends.
• Market expectations derived from option prices anticipated further surge in oil prices and allowed significant probability for right tail events.
• Given explosive trends in other commodities prices, depreciating currencies, and weakening financial conditions, recent trends in oil prices might not persist further without triggering world economic recession, regressive oil supply, as oil producers became wary about inflation.

Forecasts and market expectations

• Short-term forecasts: persistence of observed rising-price trends.
• Option-implied expectations: anticipate further surge in oil prices with significant probability assigned to right tail events.

Risks, scenarios, and potential outcomes

• If rising oil prices persist alongside explosive commodity price trends, depreciating currencies, and weakening financial conditions, possible outcomes include:
  • triggering world economic recession
  • regressive oil supply responses as oil producers become wary about inflation
• Stability of oil markets is not guaranteed without policy adjustments.

Policy recommendations and implications

• Restoring stable oil markets, through restraining monetary policy, is essential for durable growth and price stability.

Publication and document metadata

• Author: Noureddine Krichene
• Date: May 1, 2008
• Pages: 23
• Volume: 2008
• Issue: 133
• Series: Working Paper No. 2008/133
• DOI: https://doi.org/10.5089/9781451869927.001
• Stock No: WPIEA2008133
• ISBN: 9781451869927
• ISSN: 1018-5941
• Citation preview text included on page: "Noureddine Krichene. "Crude Oil Prices: Trends and Forecast", IMF Working Papers 2008, 133 (2008), accessed 9/16/2026, https://doi.org/10.5089/9781451869927.001"

IMF Working Paper — Crude Oil Prices: Trends and Forecast

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• Crude Oil Prices: Trends and Forecast; Noureddine Krichene; IMF Working Paper 08/133; May 1, 2008
  • Crude Oil Prices: Trends and Forecast; Noureddine Krichene; IMF Working Paper 08/133; May 1, 2008 (Markdown version)
  • Crude Oil Prices: Trends and Forecast; Noureddine Krichene; IMF Working Paper 08/133; May 1, 2008 (PDF)