Analysing the Impact of Influential Factors on Oil Prices: A Comprehensive Study

Abstract

The interplay between macroeconomic indicators and oil prices has been a subject of intense scrutiny due to its far- reaching implications for global economic stability. This research paper undertakes a thorough investigation into the intricate relationship between various macroeconomic factors and the occurrence of oil price shocks. The study employs a multidimensional approach, encompassing both empirical analysis and theoretical frameworks, to elucidate the complex dynamics governing this interaction. The research begins by establishing a robust theoretical foundation, delving into existing economic models that elucidate the channels through which macroeconomic indicators influence oil prices. Recognising the intricate network of supply and demand forces, the paper explores the impact of key macroeconomic factors, including GDP growth, inflation rates, interest rates, and exchange rates, on the vulnerability of oil markets to price shocks. Methodologically, the research leverages advanced econometric techniques to analyse extensive datasets spanning multiple economies and time periods. A comprehensive panel data analysis is employed to capture the heterogeneity across different regions and economies, thereby providing a nuanced understanding of the global nature of the phenomenon. Additionally, time-series models are used to unravel the temporal dynamics of the relationship between macroeconomic indicators and oil price shocks. The findings of this research paper contribute significant insights to the existing body of knowledge. The empirical results shed light on the varying degrees of sensitivity that different macroeconomic indicators exhibit concerning oil price shocks. The study also uncovers potential feedback loops and non-linearities within the system, providing a more nuanced understanding of the relationship.