Abstract
This study investigates the impact of oil price variation on 14 industries in six markets, including Canada, China, France, India, the United Kingdom, and the United States. Panel weekly data were collected from June 1998 to December 2011. The results indicate that price fluctuations primarily affect the Oil and Gas as well as the Mining industries and have the least influence on the Food and Beverage industry. Furthermore, in three out of six of these countries (Canada, France, and the U.K.), oil price changes negatively affect the Pharmaceutical and Biotechnology industry. One possible reason for the negative relationship between oil price changes and the Pharmaceutical and Biotechnology industries in the above-mentioned countries is that the governments of these countries fund their healthcare systems. Portfolio managers and investors will find the results of this study useful because it enables adjusting portfolios based on knowledge of the industries that are impacted the most or the least by oil price fluctuations.
Highlights
The Oil and Gas industry has been the engine of economic growth for most countries, directly affecting public development projects, governments’ annual budgets, and most foreign exchange sources
Oil price movements have the least impact on the Food and Beverage industry
This study inspects the impacts of oil price fluctuations on industry returns for the following six markets: Canada, China, France, India, the U.K., and the U.S For each industry, the market index and the price of oil were collected from Datastream on a weekly basis from June 1998 until the end of 2011
Summary
The Oil and Gas industry has been the engine of economic growth for most countries, directly affecting public development projects, governments’ annual budgets, and most foreign exchange sources. The U.S and China are among the major oil producers, consumers, and importers. The U.S is the 11th of major oil exporters, while China is not a major oil exporter This means that even though the U.S is the largest oil consumer and importer in the world, it still exports oil to other countries. India is the fourth largest oil consumer and importer. Regarding the importance of oil as a macroeconomic force and its impact on economic growth, this paper aims to investigate the relationship between oil price fluctuations and industry returns in six countries: Canada, China, the United States, France, India, and the United Kingdom.
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