This paper explores causes for international oil price fluctuations that have recently come into the limelight. The major causes may lie in the supply and demand of oil as well as demand for speculation. In order to analyze rationales of oil price fluctuations, this paper suggests using the structural VAR with multivariate GARCH model. Our empirical analysis shows that international price of oil may be fundamentally decided based on the supply and demand factors. Speculation transaction tends not to lead oil price fluctuations. Rather, as a price-taker, it may maintain downward price rigidity and increase prices further if oil price raises. On the other side, it may partly decrease prices further if oil price falls. Contrary to market consensus, the weak dollar effect seems not to effect the rise of oil price significantly. Conclusively, international oil prices may rise even further if certain causes for oil demand reduction, for example global economic recession, not raised or if the supply and demand conditions not improved. In other words, international oil prices may fall in case of causing oil demand reduction. In order to ensure stable oil supply, this is a crucial moment especially for South Korea which shows high oil dependency. Therefore, this paper suggests a strategic approach towards the African oil market that has been highlighted as a new source of energy supply with less hegemonic orders among advanced countries.

This paper explores causes for international oil price fluctuations that have recently come into the limelight. The major causes may lie in the supply and demand of oil as well as demand for speculation. In order to analyze rationales of oil price fluctuations, this paper suggests using the structural VAR with multivariate GARCH model. Our empirical analysis shows that international price of oil may be fundamentally decided based on the supply and demand factors. Speculation transaction tends not to lead oil price fluctuations. Rather, as a price-taker, it may maintain downward price rigidity and increase prices further if oil price raises. On the other side, it may partly decrease prices further if oil price falls. Contrary to market consensus, the weak dollar effect seems not to effect the rise of oil price significantly. Conclusively, international oil prices may rise even further if certain causes for oil demand reduction, for example global economic recession, not raised or if the supply and demand conditions not improved. In other words, international oil prices may fall in case of causing oil demand reduction. In order to ensure stable oil supply, this is a crucial moment especially for South Korea which shows high oil dependency. Therefore, this paper suggests a strategic approach towards the African oil market that has been highlighted as a new source of energy supply with less hegemonic orders among advanced countries.