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The main objectives of this research are firstly, to determined the variables which may cause the oil volatility. Secondly, to analyze that how much these variables cause the oil volatility. Secondary data from 1973 to 2011 were used to estimate the coefficients. GARCH (1, 1) model is used to analyze the volatility among the variable. Oil price, Oil supply and oil demand are stationary at 1st Difference through ADF test. It is found through Generalized Autoregressive Conditional Heteroskedasticity (GARCH1, 1) that oil demand has a significant effect on the oil price. Government should make a proper plan and procedure according to economic growth and requirement which would help to maintain the equilibrium of oil demand and supply and decreased the impact of oil price volatility on the economic growth. Exploration the oil alternatives that steadily decrease the impact of the oil price volatility, will make potential of the economy stronger to face volatility crisis.

In recent years, our understanding of the nature of energy price shocks and their effects on the economy has evolved dramatically. Only a few years ago, the prevailing view in the literature was that at least the major crude oil prices increases were exogenous with respect to the OECD economies and that these increases were caused by oil supply disruptions triggered by political disturbances in the Middle East. This view has little empirical support. Likewise, the popular notion that OPEC constitutes a cartel that controls the price of oil has not held up to scrutiny. At the same time, there has been increasing recognition of the importance of shifts in the demand for oil. Recent research has provided robust evidence that oil demand shocks played a central role in all major oil price shock episodes since the 1970s.

This study uses a model with explicit energy sector linkages to estimate the macroeconomic impacts of the 1986 collapse in energy prices. The model combines features of neoclassical macroeconomics to estimate final demand spending and of general equilibrium analysis to estimate substitution possibilities. The model allows price and wage rigidities yet permits interfuel and input substitutions. The simulation results suggest three conclusions. First, the most significant macroeconomic impact of the 1986 oil price reduction is the sharp drop in inflation. Second, output and employment gains are relatively small due to the sharp drop in energy sector output. Finally, the estimated gain in real output due to lower energy prices is close to the output loss resulting from the trade deficit increase during 1986. This may be one reason why no substantial increase in economic growth occurred following the 1986 collapse in energy prices.

How much does speculation contribute to oil price volatility? We revisit this contentious question by estimating a sign-restricted structural vector autoregression (SVAR). First, using a simple storage model, we show that revisions to expectations regarding oil market fundamentals and the effect of mispricing in oil derivative markets can be observationally equivalent in a SVAR model of the world oil market à la Kilian and Murphy (2013), since both imply a positive co-movement of oil prices and inventories. Second, we impose additional restrictions on the set of admissible models embodying the

The main objective of this research is to analyze the impact of oil price volatility on the economic growth of Pakistan. Secondary data from 1973 to 2011 were used to estimate the coefficients. Linear Regression analysis is used to analyze the dependency among the dependant and independent variables. All variable Oil price, Oil supply, oil demand, Gross Domestic production, Public sector investment, private sector investment and Trade balance is stationary at 1st Difference through ADF test. Trade Balance, Private sector investments have a significant effect on Gross domestic production and Public sector investment, Oil price volatility has insignificant impact on Gross domestic production. Government should make a proper plan and procedure according to Pakistan's economic growth and requirement which would help to maintain the equilibrium of oil demand and supply and decreased the impact of oil price volatility on the economic growth. Meanwhile, the government of Pakistan also focused on its trade balance and also tries to increase private sector investment to increase its economic growth.