Oil Price Fluctuations Research Articles

Energy use, energy access, and oil price fluctuations as new determinants of environmental quality in APEC countries

Energy security has moved to the forefront of international policy agendas and boosted efforts to deploy clean energy technologies. In the past few years, clean energy investment has accelerated at a faster rate than investment in fossil fuels, contributing to the emergence of peak oil demand. This study examines the impact of energy use, energy access, and oil price fluctuations on environmental quality in APEC countries between 1991 and 2020 using shadow economies and agricultural lands as moderating variables. The results of the Arellano-bond dynamic panel data estimation show that energy use, energy access, agricultural land, and a shady economy are positively related to CO2 emissions, while oil price fluctuations are negatively associated with CO2 emissions in APEC nations. There is a positive correlation between energy use and carbon dioxide emissions among APEC nations. As energy use increases, CO2 emissions increase as well. APEC nations have a positive relationship between energy access and carbon dioxide emissions. Policymakers in APEC countries must understand the implications of rising energy consumption and CO2 emissions. To mitigate negative environmental consequences, develop sustainable energy sources, and promote economic growth, energy efficiency measures can help to minimize energy consumption and reduce CO2 emissions. APEC countries are encouraged to develop carbon pricing mechanisms to encourage companies to reduce greenhouse gas emissions through cap and trade systems or carbon taxes. The implementation of carbon pricing mechanisms encourages businesses to switch to cleaner, renewable energy sources as a result of putting a price on carbon emissions.

The asymmetric effect of G7 stock market volatility on predicting oil price volatility: Evidence from quantile autoregression model

This paper investigates the asymmetric effect of G7 stock market volatility on predicting oil price volatility under different oil market conditions by using the quantile autoregression model. Both in- and out-of-sample results demonstrate the prediction superiority and effectiveness of the quantile autoregression model. The US and Canada's stock markets exhibit the strongest predictive ability across the entire distribution, while the UK demonstrates strong predictive power specifically during periods of high oil price volatility. Japan, Germany, France, and Italy as oil importers can predict low and median oil volatility. The strong predictability of G7 stock volatility may be attributable to their significant impact on the business cycle and investor sentiment. This asymmetric prediction ability arises not only from the average volatility shocks at various quantiles but also from the bad and good stock volatility at different quantiles. Further research suggests that bad stock volatility appears to be more predictable than good stock volatility, especially in high oil price fluctuations. Furthermore, the superiority and effectiveness of the quantile autoregression model in predicting oil volatility are proven to be applicable to emerging markets. This study may provide useful insights for policymakers, businesses, and investors to improve crude oil risk prediction and risk management under different market conditions.

Oil price volatility and changes in corporate debt: An empirical study in the Indian landscape

Changes in crude oil prices affect corporate debt position. This study investigates the association between changes in debt and crude oil price volatility in nonfinancial, BG, and SA firms in India. We use financial variables, crude oil prices, and macroeconomics data from 2004 to 2020 for 16,452 firm-years and this study employs unbalanced panel data and utilizes different empirical methodologies, including the generalised method of moments (GMM) estimator, to test the stated hypotheses. The results reveal that the debt position and the crude oil price volatility significantly have different effects on business group (BG) and stand-alone (SA) firms. Crude oil price volatility is positively related to changes in the debt position. The effects of the financial variables also significantly differ for the BG and SA firms. Finally, firms change their debt position in the positive or negative direction based on the fluctuations in crude oil prices. Policy implications have also been provided.

Seeing is believing: Forecasting crude oil price trend from the perspective of images

AbstractIn this paper, we propose a novel imaging method to forecast the daily price data of West Texas Intermediate (WTI) crude oil futures. We use convolutional neural networks (CNNs) for future price trend prediction and obtain higher prediction accuracy than other benchmark forecasting methods. The results show that images can contain more nonlinear information, which is beneficial for energy price forecasting. Nonlinear factors also have a strong influence during drastic fluctuations in crude oil prices. In the robustness tests, we find that the image‐based CNN is the most stable approach and can be applied in various futures forecasting scenarios. In the prediction of low‐frequency models for high‐frequency data, the CNN method still retains considerable predictive power, indicating the possibility of transfer learning of our novel approach. By unleashing the power of the picture, we open up a whole new perspective for forecasting future energy trends.

The effect of oil price on stock market performance and petrochemical stock value using NARDL

The aim of the study is to examine the impact of oil prices on the stock market performance and the stock value of petrochemical companies on the Tehran Stock Exchange (TSE). For this, it utilizes the Non-linear autoregressive distributed lag during 2011 to 2021 using time series data with monthly frequency. The results showed that in the short run, the oil price has an asymmetric impact on the stock value of petrochemical industries and also on the performance of the stock market, while in the long run, this effect is symmetrical. So, the influence of bouncing up the oil price is greater than the impact of its moving down. Then, the asymmetric effect happens through the increase in oil prices. Therefore, ups and downs in oil prices lead to fluctuations in the stock market returns, especially in petrochemical companies. Based on the results, capital market participants should watch the informational content of oil price fluctuations to make buying and selling decisions and invest in companies' shares according to these fluctuations.

How do oil prices affect the GDP and its components? New evidence from a time-varying threshold model

Revealing the precise thresholds at which fluctuations in oil prices start to affect gross domestic product and its various components (consumption, investment, expenditure and exports) holds significant implications for policymakers in both oil-importing and oil-exporting countries. Existing studies assessing the effects of oil prices on economic activity typically assume constant or stable threshold values. However, recent evidence suggests that this restrictive assumption may not accurately capture the dynamic nature of these relationships. We address this issue by adopting a more realistic framework that allows for the possibility that oil prices will have a time-varying effect on economic activity. We also employ the innovative time-varying threshold regression kink model of Yang and Su (2018). Our analysis focuses on a sample of 20 top oil-importing and oil-exporting countries during the period 1995Q1 to 2023Q2. The findings of our investigation provide compelling evidence to support the existence of time-varying threshold levels in the relationship between oil prices and macroeconomic activity for most countries in our sample. Notably, our research unveils a substantial heterogeneity in the oil price thresholds across the investigated countries, thereby challenging the notion of a universal threshold applicable to all.

Macroeconomic Impacts of Oil Price Shocks: Evidence from Iraq by Using Vector Autoregressive Model

Based on a VAR framework, Granger Causality Tests, Impulse Response Function and Variance Decomposition analysis on the annual data from 1970 to 2021, This study aims to demonstrate the effect of oil price fluctuations on GDP, imports, international reserves, and exports in Iraq. The Granger causality results demonstrated a unidirectional connection moving from oil price to imports, exports, international reserves, and GDP, this is an inevitable result because oil prices are determined in the international markets according to specific factors that do not include local economic variables. The variance decomposition result indicated that oil price changes are an important source of variation in the studied variables. Finally, the results of the impulse response function indicated that fluctuations in oil prices significantly impact GDP, exports, imports, and international reserves in Iraq. Therefore, we suggest that economic policymakers work seriously to develop practical plans to diversify the Iraqi economy instead of relying too heavily on oil revenues, which are characterized by sharp and continuous volatility, to avoid the negative effects of these fluctuations on the main macroeconomic variables in Iraq.

The Volatility Spillover of Global Oil Price Uncertainty

This manuscript, for the first time, analyses the volatility spillover of oil price uncertainty in the world using data from oil price uncertainty recently developed by Abdul and Qureshi (2023), spanning the time 1996-2019 on a monthly frequency. ARCH/GARCH (Autoregressive Conditional Heteroskedasticity and Generalized Autoregressive Conditional Heteroskedasticity) models are employed as an econometric tool. The findings suggest that ARCH model is more consistent than GARCH model in assessing the volatility of oil price uncertainty in the world. The results show that the volatility of oil price uncertainty is high in the world. The transition to renewable energy sources is proposed as a way to resist unexpected oil shocks since the production of renewables does not depend on the fluctuations of oil prices. Consequently, uncertainties in the oil price do not hinder economic activities.

Reinvestigating the Oil Dependency of the GCC Countries’ Stock Market: A Regime-Switching Cointegration Approach

This paper investigates the asymmetric impact of oil prices on Gulf Cooperation Council (GCC) stock markets using a regime-switching cointegration approach with data from April 2012 to April 2022. we postulate that investors consider ups and downs in the stock market index instead of price-earnings ratios in their decision-making process. Our results indicate that investors exhibit more optimism during economic upturns, corresponding to positive oil shocks, than pessimism during economic downturns. The study offers several contributions to the literature: (i) Diagnostic tests affirm that constructing the model based on stock market index movements rather than P/E ratios results in superior performance. (ii) As expected for oil-dependent nations, our model attributes more significant deterministic influence to the oil market and closely tracks the stock market. (iii) The results demonstrate that positive oil shocks exert a more pronounced long-term asymmetric influence on GCC stock markets than adverse shocks. (iv) Dynamic multiplier analysis reveals that oil shocks persist longer in Oman, Bahrain, and Qatar's markets than in the UAE, Saudi Arabia, and Kuwait. (v) The stock market in the United Arab Emirates exhibits greater independence from oil price fluctuations, responding modestly, while Qatar and Bahrain markets are more sensitive.

Oil Price Fluctuation and their Impact on the Macroeconomic Variables: The Case of Kuwait

The fluctuations in the international prices of crude oil have been a major concern for many economies who depend mainly on oil exports. Oil price shocks are a major disturbance for the economies of oil producing countries. This study investigates the impact of oil price shocks on selected macroeconomic variables in Kuwait using secondary data covering the period of 2001 to 2022. The study adopted the Vector autoregression (VAR) method to analyze the response of Kuwait macroeconomic variables to shocks in oil prices. Oil price in the study is considered in 2 categories: the linear oil price and the non-linear oil price (positive and negative changes in oil price). Based on the findings, it is observed that oil price shocks significantly impact macroeconomic variables in Kuwait. It is found that positive changes in oil prices have a more positive and significant impact on the macroeconomic variables compared to the negative changes in oil price. It is however concluded that there is a need for more policy developments to better harness periods of positive oil price experiences, and develop hedging risk framework for periods of negative changes in oil price in order to curb the impact of oil price shocks on Kuwait’s macroeconomy.

Modelling Inflation Dynamics and Global Oil Price Shocks in OAPEC Countries: TVP-VAR

This paper aims to examine the dynamic pass-through effect of oil price shocks on inflation in OAPEC countries using quarterly data ranging from 1990:Q1 to 2022:Q4. The incorporation of the TVP-VAR model along with the Markov Chain Monte Carlo method with stochastic volatility estimation offers a robust framework for capturing the time-varying nature of the relationship. Additionally, the analysis of the Impulse Response Function provides valuable insights into the short-term and long-term dynamics following oil price shocks. The results demonstrate a significant positive pass-through effect of oil prices on inflation in the sample member states, with heterogeneous magnitude and persistence. These variations are attributed to diversity in oil dependency, exchange rate regimes, monetary policy frameworks and the degree of openness to global markets. The study suggests the need for effective inflation management strategies and appropriate policy responses to oil price fluctuations. Furthermore, policymakers may consider adjusting exchange rates, interest rates, or trade policies to manage inflationary pressures effectively.

Circular behavior of oil consumption and the impact of oil prices with the Fourier approach

In the changing world, oil continues to be important in energy production. Using monthly data from 1965 to 2022, the permanency of oil consumption fluctuations was investigated. Fourier-based Granger causality tests were used to examine cause-and-effect relationships between variables. Long-term relationships were estimated using Fourier-based Engle Granger cointegration tests. Unlike previous research, this study considers the long and short-term effects of countries that consume the most and least oil, as well as on a global scale, from different perspectives, examining oil price fluctuations together, and estimating these analyzes using the Fourier approach. Oil consumption fluctuations appear temporary in New Zealand and Luxembourg but permanent in all other countries. Oil consumption and prices share a causal relationship in the US, Japan, New Zealand, and Luxembourg, but no relationship elsewhere. A long-term relationship exists between oil consumption and prices in the US, India, Saudi Arabia, Russia, Japan, South Korea, Canada, Mexico, and Estonia. In other countries, no long-term relationship is found between these two variables. Error correction model estimation shows only the equation for Japan can be interpreted based on statistical significance. A one-unit deviation between oil consumption and prices can reach equilibrium in 20 months.

The Impact of Russia-Ukraine War on Bangladesh’s Economy: A Supply Chain Perspective and Way Forward

Bangladesh’s economy is facing significant challenges restricting from the Russia-Ukraine conflict, intensified by its status as an oil-importing nation vulnerable to global oil price fluctuations. This study addresses the current perspectives and challenges which include inflationary pressures, trade imbalances, and disruptions in the supply chain, leading to increased expenditures for essential commodities. This research was developed through a systematic literature review based on secondary data, including online databases, journals, and review papers, etc. This exploratory study reveals that policymakers need to diversify energy sources, forge new trade partnerships, and implement measures to bolster economic resilience. The economic fallout from the conflict, surpassing the actual war in cost, has depleted the central bank's reserves, prompting austerity measures. The forex market experiences volatility, contributing to high trade deficits and the highest inflation rate in recent years. Bangladesh must address forex management challenges and formulate prudent policies for economic recovery. The conflict has disrupted global commodity markets, leading to inflationary pressures and increased costs for businesses in Bangladesh, especially larger organizations handling rising raw material costs and weak consumer demand. The rationale of this paper is to evaluate the literature on this aspect and apprehend the global demand, and supply of food and commodities, economic impacts in Bangladesh, challenges in global trade, trade relations, currency fluctuations, inflation, emergency price, and its consequences, recognize gaps and advocate future research itineraries. The paper offers a synopsis and appraisal of the overall economy of Bangladesh and finally navigates a way forward to the policymakers which would unlock further research to develop this sector.

Time-varying effects of crude oil price fluctuations on tuna fish prices

This research presents an investigation of the time-varying effects of crude oil on the price of three tuna species, namely skipjack, albacore, and yellow fin. The investigation analyses the impact coefficient of oil price fluctuation on tuna species over time with specific phases related to time points when crude oil prices fall, including December 2008 (due to the impact of the Financial Crisis), February 2016 (due to the impact of the US shale oil and gas revolution), and April 2020 (due to the impact of the global COVID-19). The analysis shows that the price of yellow fin and skipjack shows sensitivity to these phased oil price shocks but stays consistent after recovery. This research finds that the relationship between oil price and tuna price depends on specific phases of oil price fluctuations and that global crude oil price shocks could have immediate and short-term impacts on fish markets, especially during a period of financial crisis.

Oil price shocks and macroeconomic dynamics in resource-rich emerging economies under regime shifts

How do global oil price fluctuations affect macroeconomic activity and monetary policy in resource-rich emerging economies? This paper tackles this question by developing a unified emerging market/rest-of-the-world DSGE framework featuring Ricardian and Non-Ricardian households, an oil-producing sector, a fuel subsidy programme, and a regime-switching process. The model is estimated using Bayesian methods, allowing us to be agnostic regarding regime shifts in the monetary policy rule and oil price volatility. Using data for Nigeria, we find substantial empirical support for the regime-switching behaviour and discuss how macroeconomic implications of oil price shocks may vary depending on the nature of the shock, monetary policy responses, and the fuel subsidy policy in place. Apart from providing important insights into the monetary policy transmission mechanism, the paper offers a novel, flexible, and functional model for future policy analysis, especially in resource-rich emerging countries.

Examining the dynamic conditional correlation between oil prices and stock prices: Implications for global financial markets and the impact of COVID-19

The dynamic structure of the global economy is one of many factors that affect the fluctuations in the global financial markets. COVID-19, like all other epidemics, has been an important period in human history. Exporting and importing oil are also important distinctions in economies. This study aims to investigate the dynamic relationship between stock market closing prices and Brent oil prices of six major oil-importing and oil-exporting economies during the COVID-19 period. These stock markets have a significant impact on the world economy and serve as reference points for evaluating industry performance. The Dynamic Conditional Correlation (DCC) method are used to model the complex interactions of the energy market and markets. It aims to reveal the relationship between fluctuations in energy prices and other macroeconomic indicators. According to the findings, it is concluded that fluctuations in oil prices have a non-negligible impact on stock markets due to the persistence of ARCH effects and volatility in each financial market. Assuming that volatility continues, it is seen that volatility continues to have an impact on the markets examined.

Uncovering the dynamic relationship between oil prices and external trade in OECD countries

This study investigates the impact of oil price fluctuations on trade, including the exports and imports of goods and services, fuel exports and fuel imports. For this purpose, we employed a Pooled Mean Group estimator on the autoregressive distributed lag (PMG–ARDL) model. This approach helps investigate the short-run and long-run effects of oil price changes on trade indicators considering the difference of convergence path across countries while handling problems of endogeneity. This study examines a strongly balanced panel dataset of 34 OECD countries over the 26 years from 1995 to 2020. Overall, the findings indicate that rising oil prices have a positive and significant impact on all trade indicators. The results are consistent with the immediate and persistent influence of oil price fluctuations on trade. Nevertheless, the effects of other explanatory variables on trade vary across different trade indicators and in the short and long runs. From a policy perspective, it is vital to comprehend the appropriate policy responses to oil price changes to achieve the expected trade outcomes.

Is Greece Ready for a Hydrogen Energy Transition?—Quantifying Relative Costs in Hard to Abate Industries

During the past few years, hydrogen use has come to be considered as an alternative energy carrier in a future decarbonized world. Many developed nations are undergoing a shift towards low-carbon energy sources, driven by the excessive reliance on fossil fuels and the detrimental effects of climate change. This study aims to investigate the potential for hydrogen deployment in the Greek energy market during the next few decades. In this context, green hydrogen’s potential application in the Greek market is being assessed, employing an integrated techno-economic model grounded in worldwide trends and localized expenses. The forthcoming years will see an analysis of both the challenges and opportunities surrounding the integration and implementation of hydrogen in new and existing processes within Greece. Many alternative ways to produce hydrogen in Greece are investigated, contemplating different production paths. We evaluate how fluctuations in hydrogen, oil, and carbon prices affect the economics of green hydrogen adoption in oil refining, as is detailed in the draft of the European Union delegated act published in May 2022. The Levelized Cost of Hydrogen (LCOH) for different scenarios is calculated for the time frame up until 2050. A sensitivity analysis reveals that investment costs, electricity prices, electrolyzer efficiency, and carbon taxes significantly influence the LCOH, ultimately impacting the economic competitiveness of hydrogen production. These findings underscore the importance of aligning public–private partnership agendas in hydrogen production to create optimal conditions for investment attraction and development.

Resource curse in OPEC with varied levels of financial regulations and constraints: The role of oil price shocks and digital finance

Economic growth and development are crucial for global economies, and a nation's physical, human, and natural resources significantly impact its trajectory. Natural resource-rich nations can benefit or face the resource curse. Henceforth, this study examines the economic growth of Organization of the Petroleum Exporting Countries (OPEC), considering digital finance, financial regulations, and oil price shocks. Understanding the intricate relationship between oil price fluctuations and digital finance within diverse financial regulatory frameworks is essential for a comprehensive grasp of the resource curse in OPEC. The research employed a bias-corrected dynamic panel and MMQR model to analyze datasets from 2004 to 2022. The study reveals that Oil price shocks have led to higher economic growth when there are moderate financial constraints. However, they have a detrimental effect when the financial system is either very constrained or highly unconstrained. Digital finance has been shown to enhance Gross Domestic Product (GDP) across various levels of financial regulations. The GDP of OPEC experiences a significant adverse effect when digital finance and oil price shocks are coupled, particularly in the presence of stringent financial rules. This outcome is mainly attributed to the adverse influence of oil prices. The findings above underscore the need for moderate levels of financial regulations that support the favorable influence of oil prices and digital finance on GDP. The study additionally suggests a prospective strategy for enhancing GDP growth in OPEC nations: facilitating digital finance.

Understanding the Dynamics of Oil Price Shocks and Stock Market Volatility in Pakistan: A Non-Linear Approach during COVID-19

Purpose: This article examines the complex relationship between oil price shocks and stock market volatility in Pakistan during the COVID-19 outbreak. Design/Methodology/Approach: The study used a Non-Linear Autoregressive Distributed Lag (NARDL) model to meticulously explore how oil price fluctuations, specifically supply and demand shocks, affect Pakistan's stock market. Monthly data sets from 2020 to 2022 were utilized for the analysis. Research Findings: The study's significant findings reveal that oil price shocks, except for a demand shock specific to the oil industry, have varying long- and short-term effects on stock market volatility, leading to asymmetry. This asymmetrical impact of oil supply and demand shocks on stock market volatility is confirmed, with no asymmetry observed from oil-specific demand shocks in the short term. These findings hold crucial implications for policymakers and investors in understanding and managing the economic dynamics of Pakistan post-COVID-19. Theoretical Contribution/Originality: This research stands out for its originality in understanding Pakistan's economic dynamics post-COVID-19. It provides unique insights for policymakers and investors to navigate future uncertainties related to oil price changes and market volatility, thereby sparking new avenues of thought and action in the field. Implications/Originality/Value: The practical implications of this study's findings empower policymakers and investors to make informed decisions to stabilize Pakistan’s economy after the pandemic. Specifically, the research provides guidance on managing the behaviour of stakeholders and banks in response to oil shocks, thereby contributing to the economic resilience of the country.