The shaded areas show economic contractions. This is yet another tailwind (in addition to interest rates falling the price of oil wasn't even keeping up with inflation) we had heading into the year 2000. Now we seem to be in headwind mode.
This shows the change in price from one trading day to the next. I expected that there might be more volatility recently as oil moved substantially higher. However, that was not the case.
I'm not sure what to make of it. I offer it mostly as trivia. Is it the calm before a storm? Is it the storm? No idea.
Source Data:
EIA: Crude Oil Daily Spot Prices
National Bureau of Economic Research, Inc.
If the price was constantly increasing 5% a week wouldn't the volatility be zero because it constant?
ReplyDeleteThe volatility in price wouldn't be zero, but the volatility in the change in price would be zero, so I guess it depends on the volatility you wish to measure.
ReplyDeleteYou do have a very good point though. I've thought about doing alternate charts comparing today's price to the average of yesterday's price and tomorrow's price (using hindsight of course going back through the data). In other words, how well could we predict today's price if we knew yesterday's price and tomorrow's price? That might be useful to show any chaos in the system.
In fact, you are describing why I said this.
I expected that there might be more volatility recently as oil moved substantially higher.
I thought since the price was rising higher I should at least be picking up more volatility, at least the way I'm measuring it, simply because it was known that the price was changing fairly rapidly.