Innovations in the Crude Oil Market: Sentiment, Exploration and Production Methods

This paper investigates the impact of innovations on short-run crude oil markets. These innovations relate to U.S. energy policy-makers focus on self-sufficiency and security. The concomitant legislation facilitated hydraulic fracturing via the expeditious award to some shale-well disadvantaged states within the Union. The impact of the policy resulted in a mixed response: large-scale investment was made by EP that crude oil futures returns have a diminishing negative correlation with the drilling permit proxy and subsequently the proxy could help explain a lagged positive effect of up to 25 basis points on crude oil futures returns; and that high news negativity could also predict a 7 basis point drop in crude oil futures returns on average during the sample period.