How do oil price shocks affect the output volatility of the US energy mining industry? The roles of structural oil price shocks

This paper focuses on how explicit structural shocks that characterize the endogenous character of international oil price change affect the output volatility of the U.S. crude oil and natural gas mining industries. To this end, we employ a modified structural vector autoregressive model (SVAR) to decompose real oil-price changes into four components: U.S. supply shocks, non-U.S. supply shocks, aggregate demand shocks, and oil-specific demand shocks mainly driven by precautionary demand. The results indicate that output volatility of the U.S. crude oil and natural gas mining industry has significantly negative responses to U.S. supply shocks, aggregate demand shocks, and oil-specific demand shocks, while lacks significant response to non-U.S. supply shocks. Variance decomposition and historical decomposition confirm that U.S. supply shocks occupy most explaining variations in output volatility among the four structural oil shocks. Moreover, the oil-specific demand shocks explain more variation than that of aggregate demand shocks for the crude oil mining industry, but the opposite is true for the natural gas mining industry. (C) 2020 Elsevier B.V. All rights reserved.