Title: Herd mentality and oil prices: implications for sustainability

Authors: Hosein Piranfar

Addresses: Royal Docks Business School, University of East London, Docklands Campus, 4-6 University Way, E16 2RD, London, UK

Abstract: Despite the current volatility (early 2007), oil prices have experienced a persistently upward trend since 2004. By examining the cascading and stochastic models of herding, the paper looks at the role of herding and diminishing resources behind the volatility and rapid rise in oil prices. A main argument here is that the existence of institutional herding is not incompatible with the entry of noise traders; it rather leads and complements them. The paper also shows that persistent rise may in fact encourage sustainable alternative sources of energy to save the pernicious impact of herding, which can always rattle the prices dissuading the investors from investing in alternative energy. The methodology is based on literature review and the relevant data on oil prices.

Keywords: herd mentality; cascading models; stochastic modelling; oligopoly; oil prices; alternative energy sources; sustainability; sustainable development; institutional herding; noise traders.

DOI: 10.1504/IJGENVI.2010.030573

International Journal of Global Environmental Issues, 2010 Vol.10 No.1/2, pp.194 - 209

Published online: 24 Dec 2009 *

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