Abstract:
The aim of this paper is to identify bubbles in oil prices by using the ‘‘exponential fitting’’
methodology proposed by Watanabe et al. (2007) [28,29].Weuse the daily US dollar closing
crude oil prices of West Texas Intermediate (WTI) covering the 1986:01:02–2013:07:09
and the Brent for the 1987:05:20–2013:07:09 periods. The distinguishing feature of this
study from the previous studies is that this is the first study in the literature showing the
existence of bubbles in crude oil prices. We found that there are four distinct periods of
persistent bubbles in the crude oil prices since 1986. Two of these persistent bubbles are
before 2000 and two of them are after 2000. We conclude that further research is needed
to understand better how futures markets may impact the oil price formation.
