Decline In Oil Prices Research Articles

Time-Varying Income and Price Elasticities of Oil Demand in OECD Countries

This study examines the long-run income and price elasticities of oil demand in 21 OECD countries using quarterly data from 1980:Q1 to 2021:Q3. We find that oil demand is inelastic with respect to both income and prices at 0.117 and −0.179, respectively. The cointegration tests reveal instability in oil price elasticities over time. The time-varying panel data estimates support these findings, showing significant variations in elasticities influenced by oil market dynamics and global events. Income elasticities reached their highest levels during the COVID-19 pandemic, while price elasticities ranged from −0.396 to 0.275. Significantly, the sign of oil price elasticities shifted from negative to positive after 2015, contrary to the law of demand, probably because of declining oil prices during that period. The largest positive and statistically significant price elasticity occurred in early 2020, which can be attributed to the COVID-19-induced decline in oil prices. Overall, this analysis contributes to understanding oil demand dynamics and highlights the impact of economic and oil market factors on elasticities.

The new era of turbulence: Peacemaking trends in post-carbon times

Based on an empirical comparison of peace processes in carbon-dependent economies over time, this article investigates the impact of decarbonization and the related declining availability of political finance on peacemaking. While the period of high oil prices in the mid-2000s saw a small number of peace deals that attempted comprehensive settlements, the decline of oil prices in the years from 2014 resulted in a new era of turbulence. The turbulence is characterized by a high number of peacemaking attempts that strongly lean toward conflict management rather than resolution. The reasons for this new turbulence are twofold: the available means for substantial “buy-in,” into a political marketplace by ruling elites in carbon-dependent conflictive political marketplaces have vanished while, at the same time, the strategic interest of international powers in geopolitical stability and their willingness and capability to invest in such stability has declined.

Assessing the extent and persistence of major crisis events in the crude oil market and economy: evidence from the past 30 years

This study investigates the extent and persistence of major crisis events in the crude oil market and economy and searches for general rules of event impact. Although the short-term effects of such crises may quickly become evident, their long-term implications can be challenging to uncover. To this end, we analyzed 50 major crisis events across four categories using a Proxy structural vector autoregressive (Proxy-SVAR) model. The results show that these events substantially impacted crude oil production, world crude oil prices, and inflation in China and the United States. Generally speaking, major crisis events have a more severe impact on the crude oil market, but their impact on the economy lasts longer. Notably, geopolitical conflicts have led to a sharp decline in S&P500, resulting in a simultaneous reduction in the industrial production indices of the world, China, and the US. Among the different types of crises, the financial crisis had the most prolonged impact, persisting for approximately four years. The public health emergency represented by COVID-19 resulted in a decline in actual oil prices, with its impact on the oil market continuing for over three years. Considering our findings, we suggest four policy measures to enhance economic resilience.

Alternative Exchange Rate Systems for Oil-Exporting Countries: Frankel’s Currency-Plus-Commodity Basket Proposal versus the Current System

Choosing an appropriate exchange rate regime is crucial for economic policy, particularly for developing countries seeking to establish robust macroeconomic frameworks to mitigate external shocks. However, such nations, including those reliant on oil and natural gas exports, often face challenges in selecting suitable regimes, exacerbated by a lack of traditional advice. The debate around this issue intensified in the aftermath of the 2014 oil price decline. In response, Jeffrey Frankel proposed the currency-plus-commodity basket (CCB) arrangement in 2017, blending the benefits of floating and pegging. This study applies the CCB system to Algeria, aiming to evaluate its impact compared to the current managed floating regime from 2001 to 2021, on indicators of internal (inflation rates) and external (change in foreign exchange reserves) balance using monthly data. Employing wavelet analysis and robustness tests, specifically quantile-on-quantile regression (QQR), the findings suggest that the CCB regime surpasses managed floating in maintaining monetary stability and achieving internal and external balance. Moreover, it provides greater flexibility and stimulates the domestic economy through its ability to stabilize terms of trade via active countercyclical monetary policy. Nonetheless, further discussion, adjustment, experimentation, and development of the proposed regime are warranted.

A Grand Challenge: Digital Transformation for the Upstream Oil and Gas Industry

_ This is the fourth in a series of six articles on SPE’s Grand Challenges in Energy, formulated as the output of a 2023 workshop held by the SPE Research and Development Technical Section in Austin, Texas. Described in a JPT article last year, each of the challenges will be discussed separately in this series: geothermal energy; net-zero operations; improving recovery from tight/shale resources; digital transformation; carbon capture, utilization, and storage; and education and advocacy. _ The interval from the oil price decline of 2014–2015 through the global COVID-19 pandemic of 2020–2022 was a difficult period for the upstream oil and gas business. The industry has responded, as so many times before, by seeking to reduce structural costs with the minimum impact to required new investments, including those in nondiscretionary domains (security, including cybersecurity, and safety, health, and environmental performance) as well as those required to appropriately hedge against the emergence of new, more sustainable energy sources. Digital transformation is one of the key opportunities for the industry to systematically reduce costs across multiple business domains. While there has been active discussion of the “digital oil field” for several decades, the economic shock of the past decade revived interest in the application of digital technologies across the enterprise to improve the cost structure of businesses. Of course, at the same time, entirely new industries, such as social media, have emerged exploiting new digital technologies, including machine learning, web software and connectivity, and cloud storage and computing. These technologies have also transformed traditional industries such as retail and manufacturing. But taking the same path in the upstream industry has some special challenges and opportunities. This review focuses on digital transformation opportunities that are, to a greater or lesser degree, unique to the special data and operating environment of the modern petroleum industry. There are many valuable opportunities, including business process automations, that can and should be adopted by upstream companies, but are not different in kind from such innovations in other industries. Data Is Not the New Oil One challenge is the sheer mass and heterogeneity of upstream data. The upstream oil and gas industry is an old industry, with both business and technical records stretching back for many companies to the 19th century. These can be in paper form or a variety of digital forms reflecting the different methods of storing data since computers became a standard business and scientific tool in the 1950s. Conversion of this data to more modern formats suitable for cloud storage, for example, is not cost-free. Thus, a key principle in digital transformation is that it must be value-driven. A frequently used phrase, “data is the new oil,” is, at least for the oil and gas business itself, deeply misleading. Most of the data held by any enterprise, be it in libraries, shared data servers, or personal hard drives, is not economically useful. Much other data, while potentially valuable, requires such substantial spending on quality assurance, data curation, data transfer to points of computation, and use of (highly paid) domain experts to interpret data analysis and make business decisions that there is no pathway to reliable value based on the data.

The External Financial Crises and Their Role in The Economic Growth Fluctuations in Iraq During the Period (2004-2021)

Financial crises are a concerning and essential phenomenon due to their severe and dangerous negative impact on global stability. These crises have also spread to developing and advanced countries due to their financial and economic openness. The adverse effects of financial crises have had repercussions on global oil prices, which in turn affected economic growth in Iraq, given its dependence on the oil sector. The main objective of the research was to examine the impact of the global financial crisis on economic growth in Iraq. The research utilized deductive methodology and descriptive analysis as the appropriate approach to achieve the research goal and understand the effect of global financial crises on economic growth. The research begins with the hypothesis that the economic growth in Iraq is affected by global financial crises through oil prices in international markets. The researcher utilizes specific indicators of the Iraqi economy, including oil prices, public revenues, public expenditures, and public debt, to demonstrate the impact of global financial crises on these indicators and how this impact reflects on economic growth in Iraq, represented by the gross domestic product (GDP). The research findings highlight several impacts on the Iraqi economy due to various financial crises. These include the 2009 mortgage crisis, which decreased crude oil prices in the global market due to the global economic recession. Additionally, the financial crisis since the second half of 2014 was caused by a decline in crude oil prices due to sluggish global economic growth. Furthermore, the COVID-19 crisis at the end of 2019 had significant financial consequences, accompanied by decreased oil prices. It is evident that the Iraqi economy is directly and unexpectedly affected by financial crises through the oil markets, as the country heavily relies on oil revenues, which constitute a large proportion of the GDP. Paper: Research paper

Dynamic spillover between crude oil, gold, and Chinese stock market sectors –analysis of spillovers during financial crisis data during the last two decades

The present study investigates the presence of asymmetric return spillovers among crude oil futures, gold futures, and ten Chinese stock sector markets. Time-varying asymmetric spillovers between commodities and the 10 sectors are shown by utilizing the spillover index developed by Diebold and Yilmaz (2012, 2014). Our findings indicate that the industrial and discretionary consumer sectors generate and benefit the most from spillovers. Furthermore, it has been established that the basic materials sector exhibits a net positive impact on spillovers. In contrast, oil futures, gold futures, and other sectors demonstrate a net negative impact as recipients of spillovers. Moreover, the negative return spillovers outweigh the positive return spillovers. Our analysis spans from 2000 to 2023 to include various financial crises. The spillover effects of asymmetry are impacted by various factors, including the global financial crisis (GFC), the European sovereign debt crisis (ESDC), the decline in oil prices, and the outbreak of the COVID-19 pandemic. Including gold and oil in individual equity markets can benefit equity investors. Furthermore, implementing hedging strategies is susceptible to the global financial crisis, economic slowdown, oil price decline, and the recent COVID-19 pandemic. The oil futures exhibit the greatest hedging effectiveness during the COVID-19 spread. The findings indicate that gold exhibits comparable outcomes solely in the presence of positive spillover effects. At the same time, its performance reaches its peak during the recovery phase in the context of negative spillover effects.

Asymmetric Effect of Oil Price on Economic Activity: Evidence from Lebanon Using NARDL Model

The aim of this paper is to investigate the impact of oil prices on the real economic activity of Lebanon, represented by the Gross Domestic Product (GDP) while controlling for inflation. For this purpose, this study employs a non-linear auto-regressive distributed lag model (NARDL) that enables to take into consideration the asymmetrical nature of the relationship between these two variables. The empirical findings confirm the asymmetric impact of changes in oil prices on economic activity. Notably, reductions in oil prices positively influence GDP in the long term and exert a more pronounced fluctuating effect compared to increases in oil prices, which are statistically insignificant. In other words, the country’s GDP, serving as a measure of the total value of finished goods and services, does not respond significantly to oil price rises but is influenced by oil price reductions. This empirical analysis focuses particularly on Lebanon, and time series data spanning from 1988 to 2021 are used to explore this relationship. This study guides Lebanon's policymakers, revealing the impact of declining oil prices on economic activity. It highlights growth opportunities amidst challenges like economic crises and corruption. Advocating for prudent policies and strategies, it offers a pathway for sustainable development.

Implementation of Saudi Vision 2030 Towards Saudi Arabia’s Internationally Open Tourism Industry

The existence of globalization encourages access to worldwide economic development that does not solely rely on one sector, especially in the tourism sector. Saudi Vision 2030, in foreign policy theory, is perceived as Saudi Arabia’s strategy to diversify the country’s economy. The decline in global oil prices has resulted in the swelling of the state deficit. Under the leadership of Prince Muhammad bin Salman, the Saudi Arabian Government undertook efforts to diversify the revenue sector, aiming to reduce the country’s economic dependence on crude oil exports. Through Vision 2030, tourism is prioritized as a significant contributor to state revenue. The development of tourism components and the opening of new tourist destinations are forms of implementation initiated by the government based on the Saudi Vision. This research combines the theory of foreign policy and tourism concepts employed by the government of Saudi Arabia. The qualitative research method uses secondary data from literature studies, including journals, books, official websites, and articles. The results indicate that the realization of Saudi Vision 2030 in the tourism industry is through the development of tourism components in hotels, transportation, and restaurants and the opening of new tourist destinations, specifically in culture and adventure tourism

Financial Literacy and Retirement Readiness for Oil and Gas Indonesian Expatriates in Qatar

Expatriates are individuals who reside outside their country of origin. Their occupation is characterized as high-density, intricate, and more demanding than domestic work (Shin, 2007). In Qatar, expatriates have been employed in the oil and gas industry since 1940. However, in December 2015, Qatar Petroleum, like numerous other organizations in the oil and gas sector, encountered challenges during the period of 2015-2016 due to a sharp decline in global oil prices. The decline in oil prices during this period was primarily driven by a combination of factors, including oversupply in the global oil market, reduced demand, and geopolitical factors. These circumstances exerted significant financial pressure on many oil and gas companies worldwide, including Qatar Petroleum. To alleviate the financial impact of plummeting oil prices, many oil and gas companies had to implement cost-cutting measures, frequently involving layoffs and workforce reductions. These measures were taken to decrease operating expenses and maintain financial stability during low oil prices. In addition to this, Qatar 2008 introduced Vision 2030, which serves as a comprehensive and long-term development plan for the nation. This plan outlines Qatar's objectives and aspirations across various sectors, including economic, social, environmental, and cultural development, with a particular emphasis on sustainability and economic diversification. The leadership of Qatar presented this vision as a strategic roadmap for the country's progress over the next few decades, leading up to the year 2030. Considering these two initiatives, it is imperative for all expatriates, particularly Indonesian expatriates, to prepare for early retirement. According to the database of the Ikatan Ahli Teknik Perminyakan Indonesia (IATMI) commissariat in Qatar, there are currently over 1653 Indonesian expatriates employed in the oil industry. Research findings indicate that the financial literacy of expatriates, which refers to their knowledge, skills, and beliefs influencing decision-making and financial management to achieve prosperity, is relatively low at 46%. Furthermore, there is a weak correlation between financial literacy and preparedness for early retirement

To the test of economic recovery: The swings in energy resource prices

This paper examines how changes in oil prices impact a wide range of economic indicators worldwide, using empirical data, and a vector autoregressive (VAR) model analyzes oil price volatility. In this paper, we use fast Fourier units and multivariate regression to conduct a Granger causality test and find that volatility from 2001 to 2021 significantly affected economic recovery and spending during that period. Even during the global financial crisis, oil price and corporate investment were two of the most stable economic indicators. The COVID-19 pandemic has caused significant changes in economic activity and energy prices, and oil prices and economic growth are linked to the global financial crisis and COVID-19. In particular, the recent decline in oil prices can be traced back to the COVID-19 pandemic and worldwide economic concerns. Information about the COVID-19 pandemic spread between the oil market and banking activities faster than it did during previous global financial crises or COVID-19 breakouts. The results of this study have comprehensive implications on human understanding.

SYSTEMIC RISK’s effect ON THE STABILITY OF THE BANKING SECTOR: EVIDENCE FROM SAUDI ARABIA

The banking sectors are exposed to a lot of pressure due to the events taking place in the region, the most important of which is the decline in global oil prices and geopolitical events that led to political instability in the Middle East. This paper aims to study the macroeconomic variables that could be potential sources of systemic risks and to test their impact on the stability of the banking sector in the Kingdom of Saudi Arabia (1984-2020), using the ARDL approach of Co- integration and stability testing. In light of the economic theory and literature, systemic risks were identified by fluctuations in oil prices, interest rates, inflation and political instability as independent variables. The results showed a significant positive effect of oil prices and inflation on the banking sector's total assets and total deposits. In addition, the interest rate has a negative effect on total assets while positively affecting total deposits. Furthermore, political instability significantly affects the total assets of the banking sector during the Yemeni war, while there is insufficient evidence about its impact on total deposits.

Uncertainty about interest rates and crude oil prices

The yield on the 10-year U.S. Treasury Note is among the most cited interest rates by investors, policymakers, and financial institutions. We show that the 10-year Treasury yield’s forward-looking volatility, a VIX-style measure that is a proxy for uncertainty about future interest rates, is a useful state variable capable of predicting the returns and volatility of crude oil prices over the near term. Using monthly data from 2003 to 2020, we document that higher implied volatility in the 10-year U.S. Treasury derivatives market predicts declining oil prices and higher forward-looking volatility in those prices. Our results are robust to different subsamples and various empirical designs.

Budgetary and tax policy at the present stage and its role in forming budgets of different levels

Budgetary and tax policy is designed to ensure sustainable development of the Russian economy on the basis of modernization, to improve the living standards of the population by reducing social inequality, and to adapt the budget system to modern realities. The sanctions imposed by the European Union and the United States of America against Russia affect not only the production sphere, but also economy as a whole. The decline in oil prices, ruble devaluation, and outflow of foreign capital eventually lead to budget deficit. In these conditions, budgetary and tax policy remains one of the most important instruments of the economic policy pursued by the state. Increasing tax system efficiency becomes a priority. The objectives of the study include establishing budgetary and tax system effectiveness in forming budget revenues of different levels, including administrative centers (capitals of republics, regional centers). The article uses analysis and synthesis, generalization, grouping, dynamics, comparison, tabular method, and data of the Federal State Statistics Service, the Ministry of Finance of the Russian Federation, and the Federal Tax Service of the Russian Federation. It has been established that the existing budget and tax policy does not provide regional and local budgets with necessary financial resources as they are dominated by inter-budget transfers that cover only their deficit and do not ensure economic growth. All this predetermines the need to redistribute tax revenues in favor of regional and local budgets that will weaken the share of inter-budget transfers in these budgets.

The Impact of The Russia-Ukraine War on The Dynamics of The Asean-5 Stock Market

The capital market can be defined as activities related to public offerings, securities trading, public companies, institutions, and certain professions. One of the factors considered in stock investment is the Efficient Market Hypothesis. The Efficient Market Hypothesis is a financial theory that discusses how asset prices in the market already reflect all available information. This study employs an approach to detect market reaction and market efficiency based on the event of the world oil price decline due to the Russian invasion of Ukraine on March 10, 2022, through excess or abnormal return, price impact, and fluctuation patterns observed using a multifractal model. The research results on the abnormal return of the ASEAN-5 stock index showed a significant negative reaction at t-5 and t-3 during the event of the world oil price decline due to the Ukraine and Russia war in 2022 and a significant positive reaction at t-0 during the event. The average abnormal return before and after the announcement of the world oil price decline due to the Ukraine and Russia war in 2022 showed a significant negative reaction, but there was no significant difference in price impact between before and after the event. The efficiency level of the stock index in ASEAN-5 did not show a significant difference after the announcement of the world oil price decline due to the Ukraine and Russia war in 2022.

서방제재가 러시아 금융시장에 미친 영향

After the outbreak of the Ukraine crisis in 2014, Russia began to face economic sanctions from the West. Over time, Western sanctions have gradually expanded to various sectors such as individuals, institutions, industry, and trade. Western sanctions are expected to enlarge and prolong due to the outbreak of the Russo-U.S. war in 2022. Experts assessed those Western sanctions act as a risk factor for the Russian financial market, including increasing instability in the Russian financial market. In fact, Russian financial indicators fluctuated when new sanctions were introduced. Against this background, this study focused on the impact of Western sanctions on the Russian financial market. This study is significantly different from existing studies in that it isolates the direct impact of Western sanctions through the SVAR model using an index developed to quantitatively measure Western sanctions between 2014 and 2019. As a result of the analysis, the impact of Western sanctions was found to be very minimal. This is because the sanctions index was limited to EU sanctions, and the speed of expansion of sanctions during that period was relatively slow. The Russian financial market was found to have been more affected by factors indicating economic downturn such as an increase in the exchange rate and a decline in oil prices during that period.

Volatility of World Oil Prices Towards Venezuela's Economic Crisis

The drop in world oil prices, especially in 2014, caused Venezuela to experience a crisis. This is because oil is the country's main commodity and 95% of Venezuela's exports come from oil commodities. This study uses a qualitative descriptive research method. By using the theory of International Political Economy, International Organization, and Price Liberalization, the author tries to find out the causes of the decline in world oil prices and efforts to stabilize world oil prices in this case OPEC and market mechanisms. The results of this study indicate that Venezuela's financial inability to deal with falling oil prices due to inappropriate government policies such as the Venezuelan Social Program has caused Venezuela to experience an economic crisis. This then causes further impacts in the form of a humanitarian crisis, namely poverty, hunger, unemployment, crime, and an increase in the number of Venezuelan refugees. The series of crises resulted in Venezuela becoming one of the countries that failed to overcome domestic crises.

Comparison of the Asymmetric Relationship between Bitcoin and Gold, Crude Oil, and the U.S. Dollar before and after the COVID-19 Outbreak

This paper aims to reveal the asymmetric co-integration relationship and asymmetric causality between Bitcoin and global financial assets, namely gold, crude oil and the US dollar, and make a comparison for their asymmetric relationship before and after the COVID-19 outbreak. Empirical results show that there is no linear co-integration relationship between Bitcoin and global financial assets, but there are nonlinear co-integration relationships. There is an asymmetric co-integration relationship between the rise in Bitcoin prices and the decline in the US Dollar Index (USDX), and there is a nonlinear co-integration relationship between the decline of Bitcoin and the rise and decline in the prices of the three financial assets. To be specific, there is a Granger causality between Bitcoin and crude oil, but not between Bitcoin and gold/US dollar. Before the outbreak of the COVID-19 pandemic, there was an Asymmetric Granger causality between the decline in gold prices and the rise in Bitcoin prices. After the outbreak of the pandemic, there is an asymmetric Granger causality between the decline in crude oil prices and the decline in Bitcoin prices. The COVID-19 epidemic has led to changes in the causality between Bitcoin and global financial assets. However, there is not a linear Granger causality between the US dollar and Bitcoin. Last, the practical implications of the findings are discussed here.

Economic reform in Iraq after 2014 (obstacles and prospects)

The study deals with the difficulties facing the economic reform process in Iraq, in light of the economic and political challenges that the country faces, particularly since 2014, as a result of the dual crisis that afflicted the Iraqi economy, as a result of the dominance of ISIS gangs over a third of the area of Iraq, in addition to the sharp decline in oil prices.
 The process of economic reform in Iraq faces many obstacles, foremost of which is the rentier nature of the Iraqi economy and the spread of corruption, in addition to the poor infrastructure and the decline in foreign investments.
 In order to achieve effective economic reform in Iraq, comprehensive reform measures should be implemented aimed at improving economic conditions, improving infrastructure and attracting foreign investments, in addition to combating corruption and dealing with structural obstacles that impede the process of economic reform in Iraq. This requires enhancing transparency and improving financial and banking management, as well as strengthening the capacities of governmental and private institutions to participate in the economic reform process.

Volatility predictability in crude oil futures: Evidence based on OVX, GARCH and stochastic volatility models

The paper examines the volatility predictive ability of the CBOE crude oil volatility index (OVX), GARCH and Stochastic Volatility Models in the crude oil market. Specifically, the dynamics of two major crude oil pricing benchmarks — Brent in Europe and WTI in America are compared. OVX index is able to provide the optimal forecast for the volatility of Brent’s future. The GJR-GARCH model outperforms its competition volatility models in both oil markets. It also reveals that WTI exhibits a faster and stronger response to market shocks compared to Brent oil. Most importantly, the predictability exhibit consistent and convincing results during remarkable events: the 2014 oil price decline, the 2020 coronavirus pandemic, and the 2022 Russian–Ukraine war. In practice, the paper contributes to portfolio strategy construction and investment risk management.