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Building on recent work on the role of speculation and inventories in oil markets, we embed a competitive oil storage model within a DSGE model of the U.S. economy. This enables us to formally analyze the impact of a (speculative) storage demand shock and to assess how the effects of various demand and supply shocks change in the presence of oil storage facility. We find that business-cycle driven oil demand shocks are the most important drivers of U.S. oil price fluctuations during 1982-2007. Disregarding the storage facility in the model causes a considerable upward bias in the estimated role of oil supply shocks in driving oil price fluctuations. Our results also confirm that a change in the composition of shocks helps explain the resilience of the macroeconomic environment to the oil price surge after 2003. Finally, speculative storage is shown to have a mitigating or amplifying role depending on the nature of the shock.

Business & Economics --- Industries --- Petroleum products --- Prices --- Econometric models. --- Storage. --- Mazut --- Petroleum --- Hydraulic fluids --- Refining --- Prices&delete& --- Econometric models --- Storage --- E-books --- Investments: Energy --- Inflation --- Macroeconomics --- Economic Theory --- General Aggregative Models: Keynes --- Keynesian --- Post-Keynesian --- Energy and the Macroeconomy --- Energy: Demand and Supply --- Energy: General --- Commodity Markets --- Price Level --- Deflation --- Agriculture: Aggregate Supply and Demand Analysis --- Investment & securities --- Economic theory & philosophy --- Oil prices --- Oil --- Commodity price fluctuations --- Supply shocks --- Commodities --- Economic theory --- Petroleum industry and trade --- Supply and demand --- United States

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This paper investigates the mechanisms through which environmental taxes on fossil fuel usage can affect the main macroeconomic variables in the short-run. We concentrate on a particular mechanism: speculative storage. The existence of forward-looking speculators in the model improves the effectiveness of tax policies in reducing fossil fuel usage. Improved policy effectiveness, however, is costly: it drives inflation and interest rates up, while impeding output. Based on this tradeoff, we seek an answer to the question how monetary policy should interact with environmental tax policies in our DSGE model of fossil fuel storage.

Environmental impact charges --- Fossil fuels --- Fiscal policy --- Monetary policy --- Macroeconomics --- Tax policy --- Taxation --- Economic policy --- Finance, Public --- Fossil energy --- Fuel --- Energy minerals --- Eco-taxes --- Ecological taxes --- Ecotaxes --- Effluent charges --- Environmental exploitation charges --- Environmental impact fees --- Environmental taxes --- Green taxes --- Pollution charges --- User charges --- Econometric models. --- Government policy --- Inflation --- Natural Resources --- Energy --- Price Level --- Deflation --- Monetary Policy --- Taxation and Subsidies: Externalities --- Redistributive Effects --- Environmental Taxes and Subsidies --- Environment and Growth --- Nonrenewable Resources and Conservation: General --- Alternative Energy Sources --- Macroeconomics: Consumption --- Saving --- Wealth --- Environmental management --- Public finance & taxation --- Non-renewable resources --- Renewable energy --- Consumption --- Environment --- National accounts --- Prices --- Taxes --- Natural resources --- Renewable energy sources --- Economics --- United States