Oil Price Changes Research Articles

The Impact of International Oil Price Shock on China's Economic Growth

This article takes the impact of international oil price shocks on China's economic growth as the research object, and studies the impact mechanism of international oil price shocks on China's economic development status, providing practical value for the formulation of relevant policies in China. This article selects monthly data from January 2007 to December 2023 as the research interval, and uses the SVAR model to decompose the changes in international oil prices into three different sources of structural oil supply and demand shocks, namely oil supply shocks, oil total demand shocks, and oil specific demand shocks. The research results show that overall, the impact of international oil price shocks on China's economic growth is relatively low. International oil price shocks will have a negative impact on China's economic growth, and the average contribution of the three structural oil supply and demand shocks to China's economic growth does not exceed 13.1%. The impact of specific oil demand shocks on China's economic growth is the greatest, followed by oil supply shocks and total oil demand shocks, which indirectly reflect that China's economic growth is mainly influenced by its own factors.

Impact of oil exports and non-oil exports on economic growth in Saudi Arabia: an econometric study using ARDL approach

This study’s primary goal is to examine Saudi Arabia’s performance from 2000 to 2022. In order to accomplish this, the Autoregressive Distributed Lag (ARDL) model was employed along with a limits test. The study’s findings indicate that oil exports impact short-term and long-term outcomes during the specified study period. On the other hand, non-oil exports initially contribute positively to the country’s domestic product in the short term, but this contribution diminishes quickly and becomes negative and statistically insignificant in the long term. As a result, Saudi Arabia is dependent on the export of a single commodity, making it vulnerable to the effects of market volatility on the price of oil. To escape the excessive dependence of Saudi Arabia on oil and encourage non-oil export activities in order to stimulate long-term economic growth, the research recommends expanding into other productive sectors, such as agriculture and industry. These two sectors are vital for economic diversification, to obtain improved growth, and to limit the ramifications of the negative effects caused by international changes in oil prices. It is essential to take this strategy to prevent excessive reliance on this one-of-a-kind resource, this diversification is crucial for promoting exports beyond hydrocarbons and reducing reliance on oil. improve its level of investment in its thriving domestic sectors and take steps to lower the country’s high production costs by constructing infrastructure that would enable the growth of non-oil exports, especially because Saudi Arabia will become a member of the BRICS group of countries beginning in January 2024.

PERAMALAN HARGA CRUDE OIL MENGGUNAKAN METODE LONG SHORT-TERM MEMORY (LSTM) DALAM RECURRENT NEURAL NETWORK (RNN)

Crude oil or petroleum is a very important requirement in meeting world energy consumption. Every country definitely needs a supply of petroleum to fulfill their needs. Fluctuations in oil prices are always considered as a barometer of the economy throughout the world, so any change in oil prices is always an interesting topic to be discussed in the economic environment in every country. Therefore it is necessary to predict the price of petroleum, while the method used to predict oil prices is the Long Short Term Memory method, this study aims to predict future crude oil prices based on historical data using the Long Short Term Memory method, knowing the accuracy Forecasting crude oil prices and increasing market efficiency to be more efficient in allocating resources and in this study resulted in an RMSE accuracy of 2,665 and 2.7% Mape for data starting in 2018-2023, while for data for 2020-2023 it produces an RMSE accuracy of 2,630 and MAPE is 2.9%.

The Effect of Global Oil and Gas Prices and Production Fluctuations on the Economy of Nigeria

Once a cornerstone of the U.S. economy, crude oil production now experiences a paradigm shift, abundant for domestic consumption and export, signaling a lasting global oil price transformation. Despite a surge in U.S. hydrocarbon production and weakening oil prices, imports from Nigeria dramatically dropped from 1.5 million barrels per day in 2006 to 0.2 million in 2013, ceasing entirely by early 2014. Consequently, Nigeria faced a sudden depletion of trade surpluses and reduced foreign reserves. This study delves into the immediate and long-term challenges confronting Nigeria, particularly examining the impact of recent oil and gas price fluctuations on key macroeconomic factors. Findings highlight the balance of payments' high elasticity to oil price shifts and low elasticity to money supply changes with a coefficient of determination of 78.69%. Additionally, the exchange rate shows low elasticity to oil price changes and moderate elasticity to money supply variations with a coefficient of determination of 82.80%.

Oil Price Exposure and the Cross-Section of Stock Returns

Abstract We provide evidence that equity investors are slow to process information about how current oil price changes affect future earnings announcements. Stock prices respond to lagged quarterly oil price changes when firms start announcing earnings in the next quarter. A cross-sectional equity trading strategy that exploits this predictability yields an annualized Sharpe ratio of 0.50. Our oil-response forecast strategy earns especially high returns after large absolute oil price changes, in recessions or bear markets, and during peak earnings season. The predictability we document is consistent with limited attention, is not driven by risk factor exposure, and survives several robustness tests. (JEL G10, G11, G14, G40, Q41)

The heterogeneous impact of oil price shocks on traditional and modern renewable energy in developed and developing countries

The prevalence of renewable energy helps solve environmental problems and strengthens energy security with less dependence on nonrenewable energy, mainly fossil fuels. One important aspect is that renewable energy consists of two components: traditional and modern renewable energy. This paper examines the effects of an oil price shock on these two different types of renewable energy consumption by applying a local projection method to panel data from 147 countries during the period from 1993 to 2015. Our results show that the effects of an oil price shock depend on the development level and the dependence on nonrenewable energy. In highly nonrenewable energy-dependent countries, traditional renewable energy is sensitive to oil price changes, irrespective of their development levels. However, both traditional and modern renewable energy are insensitive to oil price changes in less nonrenewable energy-dependent countries, regardless of their development levels. Meanwhile, an oil price shock positively affects modern renewable energy in developed countries with high dependence on nonrenewable energy, but not in developing countries. These results provide important policy implications for policymakers and investors to foster modern renewable energy and call for balancing macroeconomic development with environmental benefits and costs.

Retracted: Correlation Analysis between Exchange Rate Fluctuations and Oil Price Changes Based on Copula Function

Retracted: Correlation Analysis between Exchange Rate Fluctuations and Oil Price Changes Based on Copula Function

Causal Relationships between Oil Prices and Key Macroeconomic Variables in India

India is among the largest and fastest-growing economies in the world. To continue its growth, energy is and will continue to be one of its most important considerations. With a population of over one billion, India is the third largest consumer of petroleum on the globe. To maintain this ranking, India imports a large percentage of its total oil consumption. Given India’s current position as a large importer of oil, how does oil price volatility affect the Indian economy? This paper examines the effect of oil price volatility on inflation, economic growth, and the stock market in India. Statistical tests suggest that the overall price level, the real effective exchange rate, and oil prices are negatively related to aggregate output in the long run. Granger causality test results derived from a vector error correction model support bidirectional causality between oil prices and aggregate output, indicating that a change in oil prices also affects aggregate output in the short run.

Dynamics of oil price shocks in Latin American stock markets during global turbulence: A nonlinear autoregressive distributed lag analysis

This paper investigates the impacts of oil price shocks on the stock markets of six Latin American countries – Argentina, Brazil, Chile, Colombia, Mexico, and Peru – by employing a Nonlinear Autoregressive Distributed Lag (NARDL) approach. This is during periods of global turbulence triggered by the COVID-19 pandemic and Russia’s war in Ukraine. The study used data gathered from January 2020 to July 2023, daily stock prices of the six countries, and West Texas Intermediate (WTI) as a proxy of the oil price index. The analysis revealed that the complex relationship between oil price shocks and stock markets in Latin America has changed significantly since the start of the pandemic and the Russian-Ukrainian War. The findings indicate that the relationship between oil price changes and stock markets is not a straightforward linear correlation, but rather is more complex, with non-linear and counteracting effects, likely due to the uncertainty created by the pandemic and the Russian-Ukrainian War, which has caused investors to be more cautious when responding to oil price shocks.

Does oil price volatility influences carbon emission trends and financial concerns of oil industry?

This analysis explores the complicated relationship between oil price fluctuations, the oil industry's finances, and the resulting increase or decrease in carbon emissions. Oil price changes have far-reaching effects on the global economy because of its dependence on fossil fuels; therefore, understanding these patterns is essential for effective policymaking and long-term energy planning. The study uses a dataset built from secondary data collected in China over 15years, starting in 2008 and ending in 2022. This information comes from a wide range of authoritative places, including public records, trade journals, university studies, and the records of international organizations, and provides a solid foundation for study. Oil prices on a global and national scale, oil sector financial performance indicators (such as revenues, earnings, and investment levels), and carbon emission statistics are all significant factors under investigation. As one of the world's largest oil consumers, China has been singled out in this study to allow for a more comprehensive analysis of reactions within this crucial subset of the energy industry. To understand the complex interplay between oil price shocks, the financial dynamics of the oil sector, and carbon emissions, the research utilizes statistical and econometric methods, most notably time-series analysis and regression models. The results are meant to shed light on how oil price shocks consistently affect the monetary aspects of the oil business and, by extension, the patterns in carbon emissions. This study helps us understand these vital interrelationships more completely and nuancedly.

The responsiveness of renewable energy production to geopolitical risks, oil market instability and economic policy uncertainty: Evidence from United States

This paper aims to investigate the responsiveness of renewable energy production (REP) to fluctuations in geopolitical risks, oil prices and economic policy uncertainty (EPU). It applies a cross-quantilogram framework to examine monthly data of the US economy for the period of 1986–2022. The findings illustrate the asymmetric effect of historical geopolitical risk (GPRH) on REP under long memory. The findings also hold after different subcategories of GPRH, including geopolitical threats and geopolitical acts, are considered. A positive shock in GPRH has the most decisive positive impact on REP when the policies are driven by both energy security and environmental commitments. A positive shock in GPRH can negatively impact REP when policies are driven by energy security causes only. EPU exerts strong negative effects on REP in bearish and bullish states of the market under medium and long memory across different measures of EPU. Dynamic connectedness analysis applying TVP-VAR method between pairwise variables indicates that net REP is a volatility receiver to the changes in GPRH, its subcomponents, oil prices and different measures of EPU.

Reserves, well drilling and production: Assessing the optimal trajectory of oil extraction for Brazil

The global energy matrix is in transition, leading to expectations of a reduction in fossil sources in the coming years. Brazil has substantial oil reserves but has not yet considered optimization strategies for extracting these resources. The research proposed the calibration of a Hotelling model adapted for Brazil, with a focus on maximizing the economic return from extracting reserves. We employed optimization methods to calculate the ideal annual rates of oil drilling and production in Brazil. We also assess the sensitivity of these rates to changes in oil prices, well drilling costs, discount rates, and technical progress, according to the characteristics of the reserves. The results indicate that optimal onshore production would continue to decrease in the coming years, while offshore production may be nearing its peak. Assuming higher oil prices, offshore production is expected to increase over the next five years and decline thereafter.

Connectedness analysis of oil price shocks, inflation, and exchange rate for the MENA region countries

The relation among energy prices, exchange rates and inflation has been perturbed in the recent past by both the COVID-19 shock, which resulted in a sharp downturn of the economic activity at the beginning of 2020 and the Ukraine crisis, which resulted in sharp increase in energy prices and then inflation at the beginning of 2022. This is the first paper to analyze this relation for the MENA region, conducting an empirical estimation of a VARX model on monthly data from Jan 2010 to Dec 2022 for the main 11 MENA countries. The model includes asymmetric effects, a detailed contagion analysis, conducted with the methodology à la Pesaran - Pick (2007) to identify periods of high volatility, and presents a spillover analysis à la Diebold - Yılmaz (2014), used to measure the connectedness of the three main variables.The novelties of the paper are the construction of a country specific oil portfolio; the asymmetric analysis of oil shocks and contagion; the measurement of the general impulse response spillover, to ascertain the intensity and direction of volatility spillovers. The empirical results show that: (i) the specific oil prices considered for each country induce different effects; (ii) the oil price changes effect depends on the direction and period of the shock; (iii) there are asymmetric contagion effects for exchange rate and inflation only for some countries. Finally, some policy implications are presented based on the spillover connectedness analysis, especially considering the post Covid period.

European equity markets volatility spillover: Destabilizing energy risk is the new normal

AbstractWhile energy risk is increasingly recognized as a systemic risk, there is limited comprehensive analysis of the risk propagation in regional contexts. In this study, we examine oil and natural gas price changes and shocks in relation to equity market returns and volatility for 24 European Economic Area (EEA) countries. In addition to traditional panel regressions, we also deploy the Diebold‐Yilmaz (2014) spillover index for a closed network analysis. We differentiate in the cross‐section across the core EU block, PIIGS countries, EU enlargement countries joining after 2004, and other non‐EU countries, to provide insights into the ongoing debates on the European energy market stability. While we find evidence of the manifestation of energy risk throughout the sample period, we find that until 2019 the primary sources of volatility spillover in the EEA economic network arose from economic or political uncertainty. Energy risks, measured by large crude oil and natural gas price shocks also significantly contributed to equity market volatility, with increasing volatility risk arising from natural gas, a green labelled energy source after 2019. Last, we show that CEEC equity markets are more sensitive to oil and natural gas price shocks when domestic currencies depreciate against the Euro.

Energy price shocks, exchange rates and inflation nexus

Energy price shocks, exchange rates and inflation have challenged macroeconomics stability in the recent past, during the Covid-19 crisis and the following high growth recovery post Covid. The joint relations among these three main macro-variables: exchange rate, consumer price and oil prices is modeled in this paper, in the periods of pre-Covid and of supply recovery after the Covid-19 lockdown. The estimation of an empirical VARX model on monthly data from Jan 2010 to Dec 2021 for the main 15 countries of the G20 shows asymmetric effects, offers a detailed contagion analysis, conducted with the methodology a la Pesaran and Pick (2007) to identify periods of high volatility, and presents a spillover analysis a la Diebold and Yılmaz (2014), used to measure the connectedness of the three main variables.The main innovative contributions are: i) the analysis of the country specific oil portfolio; ii) the general impulse response spillover, to ascertain the intensity and direction of volatility connectedness; iii) the disentangling of the effects on the exchange rate and price stability stemming from oil prices shocks. The empirical results show that: i) significant effects differences depend on the specific oil price considered for each country; ii) oil price changes impacts depend on the direction and period of the shock; iii) asymmetric contagion effects are relevant only for some oil importing countries and for exchange rate and inflation. Finally, based on the spillover connectedness, some policy implications are discussed.

Analysis of Monetary Policy Intervention and Macroeconomic Variable Shocks Against Capital Inflow in 4 Emerging Countries ASEAN

This study aims to analyze the effect of macroeconomic variable shocks which include economic growth, real effective exchange rate, and world oil prices as a proxy for world price stability and monetary policy intervention through controlling the money supply against capital inflow in four ASEAN emerging market countries. This study uses a panel error correction model approach to fully utilize secondary data from 2000 to 2022 in Indonesia, Malaysia, the Philippines, and Thailand. The data is collected from the World Bank and Fred Economic Data. The results of this study indicate that monetary policy intervention through money supply control significantly influences capital inflows to ASEAN emerging market countries in the long run. Then, economic growth significantly affects capital inflows in ASEAN emerging market countries in the long run. Changes in oil prices and the real effective exchange rate do not significantly affect capital inflows in the long run. Economic growth significantly affects capital inflows in the short term. Meanwhile, monetary policy intervention, the real effective exchange rate, and the oil price did not significantly affect capital inflows in the short term in ASEAN emerging market countries. The results of this study show interesting findings because world oil prices, as the main indicator of changes in business and trade around the world, empirically show no significant effect on changes in capital inflows in emerging market countries. Meanwhile, monetary policy intervention effectively adjusts the balance of capital inflows in the long run. So it can be concluded that monetary policy in emerging market countries effectively controls long-term balance.

Oil Price Volatility and Business Profitability: Evidence from The Local Market

This study seeks to investigate the impact of oil price volatility on business profitability in the Province of Guimaras. Through a mixed-methods approach, the study aims to answer important research questions such as the correlation between crude oil price changes and micro business profitability and investment, potential differences in the effect of crude oil prices during periods of high and low prices, trends in the profitability of micro businesses entrepreneurs, the role of the oil and gas upstream segment and its prospects for the future, and proposes an extension program toolkit to help micro business entrepreneurs mitigate the impact of oil price fluctuations on their businesses. The study will collect and analyze data from 200 micro business entrepreneurs operating in five municipalities within the Province of Guimaras, which represent approximately 90 percent of micro businesses in the area by population. By providing significant insights into the impact of oil price volatility on small businesses, the findings of this study can help inform policymakers and business owners to improve economic sustainability and competitiveness in the local market. The researchers recommend several strategies to help small businesses better manage the risks associated with oil price volatility. These include diversifying business operations and revenue streams, developing proactive risk management strategies, seeking financial support and education, and advocating for policies that promote energy efficiency or diversify energy sources. The researchers hope that these recommendations will help small businesses maintain profitability in the face of changing market conditions.

Asymmetric effects of oil price shocks on EUR/USD exchange rate and structural shock decomposition in a BVAR model with sign restriction

We use a VAR model with two exogenous and eight endogenous variables to evaluate the asymmetric effect of oil price changes on the EUR/USD exchange rate. The parameters are estimated with the Bayesian technique using the U.S. and the Eurozone quarterly data from 2001 to 2021. The sign restriction methodology is employed to obtain the VAR model’s structural form from its reduced form. The suggested metrics show highly time-variant oil price effects on the EUR/USD exchange rate. Oil price variability accounts for about half of the exogenous variables shocks that account for about one-third of the deterministic part of the model, which explains about two-thirds of the EUR/USD exchange rate volatility. The structural shock and historical variance decomposition identify significant time-dependent endogenous variables shocks behind the EUR/USD exchange rate variability. The impulse–response function shows asymmetric direct and indirect effects of oil shocks on the EUR/USD exchange rate, whose reaction to a positive oil price shock is more intensive, less smooth, and takes longer than in a negative shock. The dollar appreciates within three quarters after oil price increases, which suggests the United States has a specific comparative advantage compared with the Eurozone in offsetting the effects of the oil shocks.

Oil price uncertainty and corporate inventory investment

PurposeThis study examines the relationship between oil price uncertainty (OPU) and corporate inventory investments using a sample of 6,072 USA manufacturing firms from 1992 to 2019.Design/methodology/approachThe author's study employs a panel dataset to examine the relationship between OPU and corporate inventory investments. The author uses several alternative specifications such as fixed effects models, an instrumental variable analysis, an impact threshold for confounding variable (ITCV) analysis, alternative measures, additional control variables and the percent bias analysis to account for endogeneity issues.FindingsCorporate inventory investments decrease in response to high OPU. This decrease in inventory investments happens regardless of firms' expected stockout costs, information environment and reliance on external financing. As a potential mechanism, an uncertainty-induced increase in cash holdings contributes to this reduction in inventory investments. Also, the effect of OPU is non-linear and asymmetric. In response to the volatility of positive (negative) oil price changes, inventory investments decrease (increase) up to a certain point and increase (decrease) after that. Further, uncertainty-induced adjustments in inventory investments positively influence the operating performance of firms.Originality/valueThe author's study adds to the growing literature that examines the impact of OPU on corporate outcomes. Inventory investments directly affect business operations and could better reflect firms' responses to an uncertain environment.

Effects of Oil Price Shock on the Exchange Rate of National Currencies in Oil-Rich Countries: In the Case of some Arab Countries and Azerbaijan

In the article, the effects of oil price changes on inflation and the exchange rate in Saudi Arabia, Iraq, Kuwait, and UAE, as well as in Azerbaijan, were econometrically assessed. The comparison between Azerbaijan and these Arab countries was made because oil revenues play an important role in the economy of these countries, but its effects are different. Saudi Arabian riyal, Iraqi dinar, Kuwaiti dinar, and UAE dirham depend on oil prices in the world market for the long run. In the short run, there is no such dependence. It is confirmed that Azerbaijani manat is dependent on oil revenues for the long run. Addiction is not felt in the short run. In the oil-rich Arab countries and Azerbaijan, the non-dependence of the national currency on the world market on oil prices is due to the state regulation of the national currency’s exchange rate in these countries. In none of these countries is the national currency liberal, and its exchange rate is not determined by supply and demand in the market.