Abstract
As a source of revenue for the state budget and a source of energy (particularly fuel) to drive various sectors of life, the oil and gas industry plays an important role in the Indonesian economy. The purpose of this study is to analyse the effect of crude oil prices on natural gas during the Covid19 Pandemic in Indonesia. The research method used is an explanatory method using the real price decomposition of crude oil introduced recently by Kilian (2009). This study develops four variables for the oil and natural gas market through a structural vector autoregressive model (SVAR). Based on the results of the analysis, hence some evidence is found that the crude oil market affects the natural gas market in Indonesia through a combination of changes in demand and not through changes in oil supply during the Covid-19 pandemic. The uncertainty of oil supply due to the Covid-19 pandemic has made the oil market shift to the natural gas market and increased the price of natural gas as the main substitute for oil. Meanwhile, changes in demand in Indonesia during the Covid19 Pandemic affected crude oil and gas prices, causing similar fluctuations in oil and gas prices.Keywords: Crude Oil Prices, Natural Gas Prices, Demand, and Supply JEL Classifications: P41, P28, P43DOI: https://doi.org/10.32479/ijeep.10671
Highlights
Almost evenly across the globe, the negative effects were felt by one of the worst health crises in a century
If economic growth in the primary sector increases by 1%, natural gas market gain will increase by 3.714864%
If the Supply increases by 1%, the natural gas market growth will increase by 6.010411%
Summary
Almost evenly across the globe, the negative effects were felt by one of the worst health crises in a century. The COVID-19 pandemic has caused significant changes in the pattern of energy fuel supply and demand, crude oil prices which have fallen since early 2020 from around the $ 60/ barrel zone to briefly move around the $ 15 / barrel zone as a result of the economic contraction. The scheme to restrict the mobility of citizens which led to the implementation of a lockdown policy has been reported to have been implemented in 187 countries and territories Despite their different coverage, the number of activities from various sectors with crude oil as the driving force, such as those in the transportation, manufacturing, and industrial sectors, has fallen dramatically almost everywhere. The number of activities from various sectors with crude oil as the driving force, such as those in the transportation, manufacturing, and industrial sectors, has fallen dramatically almost everywhere
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