Oil Price Shocks and Welfare Social Consequences

The recent and unprecedented surge observed in energy prices, and especially in the price of crude oil, from 2003 to 2008, has given rise to heated public and academic debates about the true nature of these shocks. Due to the potential impact of these huge movements on most economies (Sadorsky (1999); Hamilton (2003); Edelstein and Kilian (2007); Kilian (2008), among others), the effectiveness of economic policies strongly depends on the identification of the major causes of oil prices movements.