August 4, 2022 | Featured Expert

Our featured expert Dr. Ehud Ronn is a Professor of Finance at the McCombs School of Business, University of Texas at Austin. His research and teaching interests focus on the valuation of energy commodity-contingent securities.

His recent piece provides an analysis of the oil market. While the content represents a semi-academic discussion on quantifying the oil risk premium, the analysis is distinguished from a typical think piece on oil prices in that it demonstrates what Dr. Ehud calls the “Message from Markets” as manifested in the prices of oil futures and options. Specifically, Section 3 demonstrated quantitatively when the markets transitioned from concern over a supply-side crisis (Ukraine) to a demand-side (potential recession) crisis.


Beginning in Feb. 2022, I considered developments in the equity and oil markets, as financial markets anticipated and then responded to the outbreak of hostilities in Europe on Feb. 24, 2022 — and, more recently, their concern over inflation and recession in the West. Inter alia, perhaps with insufficient remorse, I noted U.S. equity markets ceased to be concerned with the crisis in the Ukraine as early as March 16 — in large part, because these markets turned their attention to the prospects of a recession as the Federal Reserve Board of Governors addressed the level of inflation in the U. S. As demonstrated below, the oil markets ceased expressing heightened concern to the impact of the Ukraine crisis on or about June 15, 2022.

While the equity markets are always of substantial interest, this report focuses on the oil market:

1. The Level of Spot Oil Prices
2. The Futures Curve for Oil Prices
3. Oil Markets — Supply- or Demand-Side Crisis?
4. Near-Term (One-Year Out) Prospects for Oil Prices
5. What About that Refining Spread?
6. Spare Oil Capacity in the Persian Gulf

While some of these indicators — such as the spot price of oil — are wellknown, this report focuses on the metrics of statistical correlation (between equity and oil prices) and the implied volatilty “skew” to demonstrate the oil markets have
proceeded “beyond” the (supply-side) Ukraine crisis and are focusing more on the (demand-side) concerns regarding a possible recession in the U. S. We review the attendant implications for forecasting oil prices one-year out.

Check out the full article at the link below. The views expressed in this article are solely those of the authors, who are responsible for the content, and do not necessarily represent the views of Vega Economics. For more information about retaining Dr. Ehud Ronn as an expert, email us at

Whither the Oil Markets? A July 27, 2022 Update