2007 oil spike

19
The Oil Crisis Presented by: Max Snitkovsky Chris Zientek March 18 th , 2009

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This is a presentation on the 2007 Oil Spike as it relates to the efficiency of capital markets. It analyzes the spike as it compares to several market indexes, as well as several industry indexes. This presentation explores correlations and effects of the spike.

TRANSCRIPT

Page 1: 2007 Oil Spike

The Oil Crisis

Presented by:

Max Snitkovsky

Chris Zientek

March 18th, 2009

Page 2: 2007 Oil Spike

Hypothesis

• H0: β1≈ β2

– Where β1= Correlation of oil prices and DJIA between 1986-present

– Where β2= Correlation of oil prices and DJIA between January 2007- July 2008

• The correlation between oil prices and stock market prices during incline of the oil spike are similar to the historical correlation

Page 3: 2007 Oil Spike

β=-.05R Squared= .002

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Gulf War

Oil Oversupply

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Southwest Hedging

• 2007 was 95% hedged at $50/barrel

• 2008 was 65% hedged at $49/barrel

• 2009 is over 50% hedged at $51/barrel

• 2010 is over 25% hedged at $63/barrel

• 2011 is over 15% hedged at $64/barrel

• 2012 is 15% hedged at $63/barrel

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Percentage Price Changes

1986 - present

β= -.013R Squared= .0006

Page 18: 2007 Oil Spike

β=.044R Squared= .0039

Page 19: 2007 Oil Spike

Questions?