House prices in Aberdeen could be used to predict the future price of oil, according to academics at the University of Aberdeen.
Research carried out by Dr Martin Wersing and Dr Rainer Schulz, from the University’s Business School, reveals that the price of housing in the Granite City can be used to provide a more accurate forecast of the oil price.
Dr Wersing will present the findings at a workshop taking place at the University today (Friday, May 29), entitled Petroleum Markets: Price, Production and Government.
Commenting on the research, Dr Wersing said that information-sharing among professionals working in the city’s oil sector has an impact on the local housing market, which in turn provides an indication of potential shifts in the price of oil.
“Only in Aberdeen are discussions of house and oil prices so intertwined,” he explains. “If an oil price increase is expected, future income will be higher on average and people should be prepared to pay more for a house.
“The buying decision will be discussed with colleagues and friends, who might ponder about trading up. Eventually, by acting on the expectation of a higher future oil price, the current house price should increase.
“The house price in Aberdeen therefore condenses specialist knowledge on the future of the oil price, and our research shows that that house prices from cities where the oil industry is dominant - in this case Aberdeen - are one indicator that has the potential to improve forecasts.”
Today’s workshop, which is being held at the Sir Duncan Rice library, will also include presentations from a number of leading economists including Mine Yucel, Senior Vice President and Director of Research Federal Reserve Bank of Dallas, who as the keynote speaker will discuss the impact that fuel subsidies in oil exporting countries have on the world oil market.
Delegates will also hear from Professor Alex Kemp from the University of Aberdeen, who will present an analysis of prospects for activity in the UK Continental Shelf following the oil price collapse and measures included in the 2015 Budget to assist the sector.
The event has been organised by Dr Xin Jin and Dr Marc Gronwald, from the University’s Centre for Research in Energy Economics and Finance (ACREEF)
Speaking ahead of the workshop, Dr Jin said: “Friday’s workshop will bring together leading economists to discuss various aspects of the petroleum market, including Mine Yucel of the Federal Reserve Bank of Dallas, who is a renowned expert in the area of crude oil prices and taxation of oil production.
“In addition, delegates will hear from our own Professor Alex Kemp on the future prospects for activity in the North Sea, as well as from Dr Martin Wersing, whose research on house prices in Aberdeen and its relationship to the oil price suggests a leading indicator for the price of oil that has not been previously considered.
“The workshop will include presentations on a number of other topics, and will end with a policy forum where delegates will have the chance to discuss the issues raised with our panel of expert speakers. It promises to be an interesting and worthwhile event, and we look forward to welcoming all involved to the University today.”