Fall In Oil Prices Research Articles

Geopolitical risk and energy price crash risk

This paper explores the link between geopolitical risks and energy prices crash risk. Studying energy price crashes is important given the sharp fall in oil prices in 2008 and 2014. The analysis focuses on three energy markets: natural gas, oil, and coal, while it employs two measures: the negative coefficient of skewness and the down-to-up volatility, to construct proxies for crash risks. The period of examination is January 2000 to December 2023, whereas that for coal is January 2010 to December 2023. The study employs a modified version of the smooth transition autoregressive model. The results show that, within the modelling framework, coal and oil crash risks are driven by the cyclical behavior of geopolitical acts, whereas natural gas crash risks by geopolitical threats. Causality tests confirm the prediction that geopolitical tensions cause crash risks in energy markets. The results also confirm that the “Economic Activity Channel” is only valid for energy markets driven by geopolitical threats. Energy market regulators should be concerned about crash risks, given that the energy supply shows cyclical boom and bust cycles in prices and production. Crash risks could also potentially cause a fall in investments required to enhance energy efficiency.

Impact of Oil Price Shocks on Islamic and Conventional Bank Performance: Empirical Evidence from Saudi Arabia

This paper aims to investigate and compare the effect of oil price shocks on the bank performance at the aggregate level as well as the level of conventional and Islamic banks. The Autoregressive Distributed Lag (ARDL) methodology was adopted to analyze a panel of 10 Saudi banks, including 6 conventional and 4 Islamic banks, between 2006 Q1 and 2022 Q4. The results revealed that oil price shocks have a direct impact on banking performance. A rise (fall) in oil prices led to an increase (decrease) in bank performance through the channel of price-induced bank deposits. Additionally, oil price shocks have asymmetric effects, with positive oil shocks having a greater impact on bank performance than negative shocks. The findings highlighted that conventional banks tend to benefit more from oil price shocks, especially during oil price booms, as they experience higher positive impacts. However, during oil price busts, Islamic banks were more adversely impacted by oil shocks.

Assessment of exchange rate determination in a mono-resource economy: A case of Nigeria

<p style="text-align:justify"><span style="font-size:16px"><span style="font-family:Times New Roman,Times,serif"><span dir="ltr" lang="EN-US"><span style="color:black">This study examined the determinants of the exchange rate in a mono-resource economy, during the period of currency and oil price fall in Nigeria. The aim of the study is to ascertain the potentiality of economic diversification (non-oil export) in saving the falling value of the domestic currency, as well as, its stability. The study employed the use of monthly data from the Central Bank of Nigeria and Nigeria National Petroleum Corporation from January 2008 to December 2020 using the ARDL and NARDL models to achieve the stated objectives. In the literature, several empirical studies analyzed the relationship between exchange rates, oil price, and oil export and came to the logical conclusion that a rise in the price of oil would bring about a rise in the exchange rate, all things being equal while the reverse is the case. To add to the existing body of knowledge this study did not only look at the relationship between the variables but also examined the determinants of the exchange rate in a mono-resource economy and ascertained the potentiality of economic diversification in bringing succor to the falling exchange rate in the midst of falling oil price. The NARDL result corroborates the findings of previous studies on the relationship between exchange rate, oil price, and the performance of non-oil export. It maintains that positive changes in oil prices would lead to the appreciation of domestic currency while negative changes in oil prices would lead to the depreciation of the domestic currency. With this analysis, the study recommends the diversification of the economy and revitalization of the non-oil sector. Since import proves to have a negative impact on the exchange rate, the revitalization of the non-oil sector stimulates domestic consumption and thus reduces import bills which raise the demand for the dollar and weakens the naira.</span></span></span></span></p>

State-owned enterprises as countercyclical instruments: Quasi-experimental evidence from the infrastructure sector

This paper examines the effects of a negative macroeconomic shock on the financial performance of state-owned enterprises (SOEs) in infrastructure. The main aim of the paper is to explore whether SOEs serve as countercyclical instruments or whether they end up generating fiscal costs during a downturn, perhaps amplifying negative shocks. The paper introduces a new measure of fiscal injections that includes subsidies, equityrecapitalizations, and loans from the government, other SOEs, or state-owned financial institutions. The empirical setup uses a quasi-experimental setting that exploits the differential effects of a drastic fall in oil prices (in 2014–15) for SOEs in countries that experience a negative aggregate demand drop as a consequence of this shock versus similar firms in countries that do not suffer a downturn from the shock. The results—based on a balanced sample using coarsened exact matching and a differences-in-differences estimation—show that SOEs in treatment countries received increases in fiscal injections as a percent of average assets of 3.5 percent the year after the shock, equivalent to a significant recapitalization. These fiscal injectionstake the form of equity injections and loans from the government and state-owned financial enterprises. The results also show that capital expenditure as a percent of average assets in fully owned infrastructure SOEs decreased by 3.5 percentage points the year after the negative shock, equivalent to a 40 percent decline relative to its average level. In sum, this paper presents evidence that shows that SOEs do not serve as countercyclical tools and, in fact, may amplify negative shocks by requiring fiscal injections for SOEs while also lowering their capital expenditures.

A new progressive and efficient production sharing Contract for upstream oil and gas industry

After the pandemic, the structure of the upstream petroleum business changed. Exploration and production (E&P) companies no longer base their investment decisions on the geological prospectivity of the offered blocks but rather on how the fiscal systems adopted by host governments behave under such uncontrolled and unexpected events. Many E&P companies couldn't survive during the pandemic. This is because many governments adopt regressive and front-end-loaded systems that are not designed to accommodate such periods of low oil prices. This research, therefore, presents a new methodology to design the main fiscal elements of production sharing contracts (PSCs). These elements are: royalty, cost recovery limit, production sharing, and income tax. The performance of the proposed PSC model under different oil prices, production rates, and development costs is investigated using deterministic sensitivity analysis. Our results showed that the proposed PSC model is a progressive and win-win fiscal system. The performance of the proposed PSC model is compared with Ghana's fiscal system and the new Nigeria's Petroleum Industry Act (PIA 2021) under a wide range of oil prices, production rates, development, and operating costs. The comparative study proved that the proposed PSC model enhances the survival and sustainability of E&P companies during periods of falling oil prices. The comparative study proved that, unlike the proposed PSC model, Ghana's fiscal system and PIA 2021 are regressive. Furthermore, the contracting parties are not in a win-win situation.

Nigeria’s Financial Sector Liberalization: An Implicit Cultural Policy for Art Market Development

This study adopted historical research and in-depth interviews with artists, dealers, art writers, and collectors in addressing two overarching questions, which are (1) How have state actions manifested as the impetus and impediments to art market development in Nigeria and (2) To what extent is Bourdieu’s artistic field model applicable to the Nigerian art world? As the boost in artistic production and consumption in Renaissance Italy was attributed to the wealth generated from banking by the Medici, the research also shows that the art market in Nigeria emerged as an upshot of the economic policy of financial deregulation, which manifested as an “implicit” cultural policy. The financial sector liberalization policy was aimed at addressing the economic depression that stemmed from the drastic global fall in crude oil prices in the 1980s. It stimulated the proliferation of banking and other financial services institutions in Nigeria, which engendered intense competition that lured operators into harnessing esthetics for competitive advantages. This bolstered art collection and patronage, underpinning the emergence of the contemporary art market in Nigeria with an auction segment that grew from about $250,000 in 1999 to over $5.5 million in 2017. Paradoxically, the research also revealed that inadequacies resulting from the lack of “explicit” state plans for the cultural sector constitute impediments to the optimization of the market’s potential. As a mark of power, high art and advanced taste have always been associated with elitism. Thus, the research also establishes a high degree of applicability of Bourdieu’s artistic field model in exploring the dynamics of power structures in the Nigerian art world.

Does agricultural trade respond asymmetrically to oil price shocks? Evidence from New Zealand

AbstractDo rising oil prices affect agricultural trade differently from falling oil prices? We answer this question using data on New Zealand, a net importer of oil and a net exporter of agricultural commodities. We consider a disaggregated approach, analysing exports and imports of five key commodity classes; nonlinear autoregressive lag models are employed to conduct the analysis. We find considerable evidence suggesting asymmetries in the effects of oil price shocks on agricultural trade in the long and the short run. Furthermore, in the long run, agricultural exports and imports appear to be largely insensitive to foreign and domestic real income, respectively; there is limited evidence for imports and exports being associated with the real effective exchange rate. In the short run, however, income and exchange rates are associated with imports and exports.

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.

Effect of Exchange Rate on Domestic Price Level in Nigeria

Nigeria experienced significant depreciation of her currency during the specified period of this study, mainly due to factors such as falling oil prices, external economic conditions such as slowdown in global economic growth, trade tensions which led to capital outflows from emerging markets including markets in Nigeria, tightening of global monetary policy which affected capital flows to these emerging markets, coupled with domestic macroeconomic challenges like concerns over policy consistency, governance issues and security challenges, capital flight and weakened investors’’ confidence. These conditions collectively created an adverse environment for the Nigerian economy, leading to the depreciation of Naira. Consequently, this study set out to achieve the main objective of investigating on a more recent basis, effects of exchange rate on domestic price level in Nigeria. The period covered was from January 2015 through December 2022. The study adopted the Autoregressive Distributed Lag (ARDL) model and the variables included consumer price inflation, nominal exchange rate, import prices, international crude oil prices and real output growth. We found insignificant positive impact of the nominal exchange rate on consumer price inflation in Nigeria. The import prices also proved a significant effect on consumer price inflation in Nigeria. the study recommends that Governments at all levels in the country should encourage and support the innovative ideas of business firms and individuals. This will support local production, hence, there can be substitution of imported goods for domestically produced goods and the exchange rate will be stable.

Are REITS hedge or safe haven against oil price fall?

This paper studies the hedge against falling oil prices and the safe haven properties of fourteen major country-specific real estate investment trusts (REITs) indices for the Asian, American, European, and worldwide geographies. Our analyses are performed from both, returns and conditional volatility perspectives. Our sample spans from January 2016 until August 2022, covering the COVID-19 pandemics and the ongoing Russia-Ukraine military conflict. We find that during COVID-19, only the Japan REITs, in terms of both returns and volatility, act as a hedge for oil whereas the only hedge during the Russia-Ukraine conflict is the Netherland REITs. In addition, we document diverse degrees of safe-haven and diversifiers properties for REITS from diverse geographies along the full sample and the respective sub-samples for both bearish conditions and elevated volatility in the oil market. Our results imply that market regulators should focus on controlling volatility in crude oil and REITs markets, especially throughout times of financial distress, as daily return volatility monitoring is a pivotal requirement for optimized investment management. Our study provides important knowledge for investors, policymakers, and market regulators.

Asymmetric effect of the oil price in the ecuadorian economy

This paper aims to identify if there is an asymmetric response of the output to positive and negative changes in the price of oil. We take the case of Ecuador, an oil exporter but also an importer of derivates of the same commodity. We apply the local projections methodology to estimate this asymmetric response through state-dependence impulse response function. The results put in evidence that between the positive and negative variations of oil prices, those which affect the most to the Ecuadorian GDP are the negative ones. We also show that the persistence of the effect is higher when the oil price fall, rather than when there are positive variations.

Accounting for the Effects of Oil Prices on Exchange Rate in Nigeria: Empirical Evidence from Linear and Non-Linear ARDL Models

This study empirically examines the impact oil prices on the exchange rate in Nigeria. Time series annual dataset spanning 1980 to 2018 was estimated using the linear and nonlinear ARDL model developed by Pesaran and Shin, (1998) & Pesaran, et al. (2001) and Shin, et al. (2014); where oil prices, nominal exchange rate, interest rate, and oil revenue serves as the variables for analysis. From the result of the linear-ARDL models both the long run and short-run revealed that oil price has positive and significant impact on exchange rate. Similarly, the nonlinear model also revealed that, both in the long run and short-run, the depreciating effect of a fall in oil price is stronger than an appreciating effect of a arise in oil price of an equal magnitude. This, we argue, reflects the dependency of the economy on oil. One policy implication of this finding is that stability of oil prices and oil revenue is critical for the stability of the domestic currency and, hence, prices. It is, therefore, recommended that authorities should focus on resolving the production difficulties in the Nigeria’s oil industry as a means of reducing the current revenue volatility.

Multipliers based on net income as an indicator of the investment attractiveness of domestic vertically integrated oil and gas companies

Subject. This article focuses on the market-capitalization-to-net-income ratios of the twenty five leading publicly traded oil and gas companies within 2008 through 2018. Objectives. The article aims to identify key trends in the changes in the values of market-capitalization-to-corporations'-net-income ratios of the oil and gas companies, as well as identify key trends in their change within the studied period, and identify the factors that caused those changes. Methods. For the study, I used the methods of comparative, financial and economic analyses, summarizing financial reporting data. Results. The article finds that the studied multipliers based on net income of shareholders are of little use for assessing the value of oil and gas companies due to the volatility of oil prices. Integrated corporations are not as dependent on oil prices as independent companies. Net income can be affected not only by a decrease in revenue, but also by the cost of impairment, revaluation or write-off of assets in the event of a fall in oil prices, and therefore, the use of the multipliers is advisable in case of high profitability in the industry. Net income may also be affected by income and expenses that are not related to operating activities. This factor should be taken into account when choosing an analogue company. It was revealed that the characteristic features of the market capitalization of companies in the industry are reflected in the indicators, which include the provision with proved reserves and level of debt. It is better to use an enterprise value indicator instead of market capitalization in a multiplier if there is a noticeable difference in debt burden. Conclusions and Relevance. To apply the multipliers based on net income is very difficult in the face of declining profitability and increasing debt burden in the stock market sector of the global oil and gas industry. The findings can help appraise the value of oil and gas assets as part of a comparative approach and decide on actions for raising the market capitalization of publicly traded oil and gas corporations.

The Impact of Credit Bureau on the Non-Performing Loans Situation in the Nigerian Banking Landscape

Lending in the Nigerian banking space has continued to evolve over the years. As changes have occurred in the banking system, so has the level of non-performing loans evolved.
 While the growth in non-performing loans has been as a result of various unwholesome practices in the industry, others have been as a result of global economic downturn such as the United States housing bubble in 2007 - 2008 and then the fall in demand and price of crude oil in 2016, caused another round of financial crisis.
 The Nigerian banking landscape has been bedeviled with lots of non-performing loan challenges over the years. The disbursement of credit facilities in the form of advances, loans, and overdrafts by banks to corporate bodies, individuals, private and public entities occupies a critical and strategic position in the economic growth of a nation. To perform this function, Banks muster funds from the nation’s surplus economic unit of the economy.
 This thesis focuses on how the establishment of credit bureau has impacted the growth or otherwise of non-performing loans, lending practices and policies of banks in Nigeria. 
 Collected and analyzed data through primary and secondary sources. Questionnaires were administered to bank officials and the three major credit bureau companies. However, as is the case with questionnaires distributed, some were returned unanswered due to people being reluctant to furnish detailed replies. 
 This study sets out the theoretical background, rationalization and objectives of the study. A lot of literature reviews on lending policies and reviews of credit control in the banking industry were undertaken, the need for efficient loan administration and the causes of non-performing loans in the banking industry. A summary of the findings, recommended solution and conclusion to the research problems is presented. The outcome revealed that deficient credit analysis, as well as any negative economic impact on the country, has always played a major role in the growth of non-performing loans.
 This study examined the reasons for non-performing loans in the Nigerian banking industry and the impact the credit bureau has played. The ex-post facto research design was adopted during the course of the study. Data from the Central Bank of Nigeria Statistical Bulletin and Financial Statement of banks for the period 1994-2019 were collated for the time series analysis. The five hypotheses stated were tested using the Ordinary least square regression. Non-performing loans measured by the natural logarithm of aggregate non-performing loans of banks represented the dependent variable, while gross domestic product, inflation rate, total loans and advances, total assets and bank’s lending rate were adopted as the independent variables for the five hypotheses of the study. Macroeconomic variables such as exchange rate, and interest rate were also included as control variables. 
 The result derived from this study showed that GDP had a negative effect on non-performing loans; Bank lending rate, Inflation rate and total loans and advances all had a positive effect on non-performing loans but was insignificant; total Assets exerted a negative effect on non-performing loans and was statistically significant at the 0.05 level.

THE EFFECT OF THE COVID-19 PANDEMIC ON THE FINANCIAL PERFORMANCE OF THE 15 TOP LISTED GREEK COMPANIES AND ON ENTREPRENEURSHIP

Even companies with high stock market values suffered financial setbacks due to the COVID19 pandemic that swept the globe in early 2020. During the COVID-19 period, the environment was characterized as hostile and complex, where the confluence of rapid technological developments on the international chessboard and the rapid globalization of markets brought about universal changes in the status of businesses and their ability to survive in an increasingly and constantly changing competitive global environment. Entrepreneurship is the pillar of business survival, prosperity, and economic growth and is the most critical factor in reducing this negative phenomenon. The study examines the evolution of key accounting indicators found in the financial statements of the fifteen largest companies by market capitalization listed on the Greek stock exchange in 2021. The results of the survey revealed that the fuel production companies HELLENIC PETROLEUM and MOTOR OIL as well as the vehicle rental company AUTOHELLAS were the most negatively impacted due to the significant decline in turnover. The study analysed data before and during the pandemic in 2018–2019 and 2020–2021. PPC (public power corporation), on the other hand, benefited greatly from the pandemic as a result of lower electricity generation costs from falling oil prices.

유가 변동은 경제성장에 대해 비대칭적 효과를 갖는가?

In this paper, We empirically analysis the impact of oil prices on the economic growth of Korea, China, and Japan in Northeast Asia. The analysis period used variables such as per capita GDP, international oil prices, real effective exchange rates, consumer price index, and total currency in the three countries from the first quarter of 2000 to the fourth quarter of 2022. The NARDL model proposed by Shin et al. (2014) was applied to analyze the effects of rising and falling oil prices. In this study, first, it was found that fluctuations in oil prices in all three countries affect economic growth. However, it was not statistically significant in the long run. Second, the impact of oil prices on economic growth in all three countries was found to be asymmetric. In the short term, the rise and fall of oil prices showed statistical significance in Korea, China and Japan. Third, the impact of oil prices in Korea and Japan is similar to the analysis results of previous studies analyzed in advanced countries (e.g., OECD countries). However, in the short term, the impact of oil price fluctuations on China has differentiated results from Japan and Korea. Each of the three countries’ error correction terms coefficients is statistically significant, which means that short-term economic growth is adjusted to a long-term equilibrium relationship at a certain rate for one year if any impact occurs in the system.

Upside/Downside spillovers between oil and Chinese stock sectors: From the global financial crisis to global pandemic

This paper examines the effects of the COVID-19 outbreak, recent oil price fall, and both global and European financial crises on dependence structure and asymmetric risk spillovers between crude oil and Chinese stock sectors. Using time-varying symmetric and asymmetric copula functions and the conditional Value at Risk measure, we provide evidence of positive tail dependence in most sectors using copula and conditional Value-at-Risk techniques. We can see the average dependence between oil and industries during the oil crisis. Moreover, we find strong evidence of bidirectional risk spillovers for all oil-sector pairs. The intensity of risk spillovers from oil to all stock sectors varies across sectors. The risk spillovers from sectors to oil are substantially larger than those from oil to sectors during COVID-19. Furthermore, the return spillover is time varying and sensitive to external shocks. The spillover strengths are higher during COVID-19 than financial and oil crises. Finally, oil do not exhibit neither hedge nor safe-haven characteristics irrespective of crisis periods.

Study of the Modal Evolution of the Causal Relationship between Crude Oil, Gold, and Dollar Price Series

The rise and fall of crude oil prices, gold prices, and US dollar exchange rates is of great significance to investors. It is necessary to explore the evolution characteristics of the causal relationship between crude oil, gold, and US dollar, so as to provide reference for investors. We selected the ICE Brent crude oil continuous futures, the ICE WTI crude oil continuous futures, the NYMEX light crude oil continuous futures, the COMEX gold continuous futures, and the US dollar index as the research objects. Based on the theory of pattern causality, the causal relationship between crude oil, gold, and US dollar is divided into positive causal relationship (T), negative causal relationship (F), and disordered causal relationship (D). The causal modal evolution network of crude oil and gold prices against the US dollar index (BWCGG-U) and the causal relationship modal evolution network of the US dollar index on the price of crude oil and gold (U-BWCGG) were constructed. Complex network and sliding window are used to study the evolution characteristics of short-term causality between crude oil and gold and US dollar in 60 days. The results show that (1) the modes of causality between crude oil, gold, and the US dollar index are constantly changing, with a few key modes. The key modes are often transmitted to themselves. (2) The most critical modes of two networks are all FFFF, and the negative causality between gold and the US dollar index is more stable. Investors based on the gold (dollar index) price to judge the dollar index (gold futures) investment program are more reliable. (3) When crude oil and gold show causal modes of FFFF and DDDF, respectively, the emergence and transformation of the modes can be maintained for a period of time to provide a certain guarantee for investors’ investment. However, its internal conversion rate is high, which needs to be judged in combination with the actual situation to improve the forecasting ability.

Implications of the energy transition for government revenues, energy imports and employment: The case of electric vehicles in India

Whereas the environmental benefits of transitioning away from fossil fuels are becoming indisputable, the implications for government revenues, employment, balance of trade, and employment appear less clear. Using an accounting-like framework, we analyze the potential near to medium-term implications of electric vehicles displacing internal combustion engine (ICE) vehicles. Total cost of ownership (TCO), imports, government revenues, employment and greenhouse gas (GHG) emissions are each lower with EVs under different market and policy scenarios considered. An exception is a steep fall in oil prices (say by 50% from current levels), which increases net energy imports when battery cells are imported. Targeting high usage vehicles for EV adoption amplifies reduction in TCO, GHG emissions and imports but also leads to greater reduction in tax revenues. Furthermore, foregone tax revenues from avoided fossil fuel consumption is several times greater than the subsidies to EVs in the form of preferential tax rates. On a per vehicle basis, each fossil fuel vehicle generates over six-fold greater taxes over its life relative to an EV. Whereas economic growth and public policy can mitigate adverse impacts on government revenues and employment, simultaneously reducing total emissions as well will, if history is a guide, be more challenging.

Government healthcare financing and dwindling oil prices: Any alternatives for OPEC countries?

Crude oil is one of the sources by which budgets are financed in OPEC countries. However, the fall in oil prices in 2014 put their governments’ finances under significant pressure. Healthcare was one of the sectors experiencing fiscal strain. This study examined the effect of a fall in oil prices on healthcare financing in eight OPEC countries and whether such financing has shifted away from the dependence on oil. Quantitative healthcare expenditure data from the WHO covering the period from 2003 to 2019 were evaluated using a comparison of means Welch’s t-test. The result showed that government healthcare expenditure in Iran, Venezuela, and Kuwait increased in the period post-2014 compared to the expenditure after 2008 and 2002, suggesting that these countries succeeded in shielding such spending against the fall in oil prices. By contrast, the United Arab Emirates, Saudi Arabia, Iraq, Nigeria, and Algeria did not, highlighting that they have not yet moved from dependence on oil. With the economic uncertainty caused by oil fluctuations, global political and economic developments, and the world transitioning to green energy, oil-dependent countries should free their governments’ healthcare expenditure from dependence on such sources of funding. Furthermore, they should not focus on temporary plans by shifting the burden to private spending at a time of falling oil prices, but to utilize different financing approaches.