High Oil Prices Research Articles

Talk green, act brown: Transition risks and drilling investments of U.S. upstream oil and gas firms

AbstractThis paper explores the relationship between upstream oil and gas firms' proactiveness in addressing climate change transition risks and their drilling investments. We propose that due to limited capabilities to transition to renewable energy, these firms may strategically display proactiveness to greenwash their intentions to increase drilling activities. Leveraging a unique dataset comprising manually collected information on upstream firms' drilling investments, we find empirical evidence supporting our hypotheses. Specifically, firms showing greater proactiveness toward transition risk during earnings calls paradoxically increase their drilling investments. Additionally, high oil prices negatively moderate this relationship by creating a lucrative environment that benefits stakeholders, such as shareholders and investors, and simultaneously alleviates internal resource constraints, thereby reducing the need for greenwashing. This study contributes to the literature by illustrating how firms, under significant societal pressure but lacking transition capabilities, employ greenwashing tactics to obscure their investment activities.

MODELING COOKING OIL PRODUCTION WITH CRUDE PALM OIL (CPO) PRICE USING TRANSFER FUNCTION

Indonesia is the largest palm oil producer in the world. However, Indonesia is currently experiencing a significant scarcity of cooking oil for the basic needs of the community. One of the causes of this problem is the high price of crude palm oil (CPO). The price of CPO affects the production of cooking oil produced by the cooking oil industry. CPO prices are released in the form of daily prices in the market which form a time series pattern that affects the production of cooking oil which is also produced daily in the industry. To forecast cooking oil production from CPO prices can be done with a transfer function model. The stages of analysis are forming an ARIMA model, processing input time series whitening, and output time series whitening. Checking white noise by plotting ACF αt, ACF βt. Make a CCF graph and determine the order (r,s,b). Estimate the first parameter of the disturbance series (nt) and identify the disturbance series (nt) in the ARIMA model. Next, perform a diagnostic check of the transfer function model by checking the cross-correlation between Xt & Yt and checking the autocorrelation of Xt and Yt for model feasibility testing. Then make an ACF graph of the transfer function model's residuals to test the model's suitability. The final stage is to select the best model based on the smallest AIC value, ensuring the accuracy of the selected model using MAPE value, and making predictions. As a result, the model for CPO price is an input series variable, and cooking oil production is an output series variable. However, the MAPE result was 100%, indicating that the model is not very accurate for this data. Nevertheless, by ignoring the result and continuing with the forecasting, this model shows that the forecasted values for cooking oil based on CPO price have increased from the form of the model obtained for the time data from 2013 to 2022.

From petrodollars to green power: Fiscal stability and green transition in GCC economies

This study examines the influence of fiscal stability, characterized by fiscal buffers, on the green transition in the Gulf Cooperation Council (GCC) economies from 2005 to 2023. We apply two-way fixed effects, system generalized method of moments (GMM), method of moments quantile regression (MMQR), and panel causality analysis to explore these dynamics. Our findings underscore that a positive fiscal buffer resulting from a significant spread between oil prices and fiscal breakeven levels exerts a substantial positive impact on green transition efforts in GCC countries. The results reveal that countries with higher levels of renewable energy production capacity and urbanization demonstrate more pronounced advancements in green transition initiatives. Conversely, countries grappling with unstable macroeconomic conditions, such as high inflation and external debt, face considerable challenges in achieving significant improvements in green transition outcomes. Additionally, our analysis shows that fossil fuel energy fiscal subsidies negatively influence green transition efforts in the GCC region. Our study emphasizes that policymakers in GCC countries should pursue a dual-pronged strategy: leveraging positive fiscal buffers to diversify their economies in light of potential benefits from high oil prices, and channelling oil and fiscal revenues towards enhancing renewable energy production capacities. This approach aims not only to diversify economic foundations but also to strategically strengthen the infrastructure necessary for sustainable renewable energy transitions in the region over the long term.

How Do Household Coping Strategies Evolve With Increased Food Insecurity? An Examination of Nigeria's Food Price Shock of 2015–2018

ABSTRACTFaced with a significant devaluation of its currency and a surge in food prices, the Nigerian government prohibited the use of foreign currency for food imports. This essentially blocked the importation of numerous food items under the guise of stimulating the domestic output of these staples. Consequently, food prices in Nigeria increased despite a global decline in food prices, and the incidence and severity of food insecurity escalated. This study examines the changes in the types and severity of coping mechanisms for food insecurity resulting from the food price shock caused by the oil price crash, currency devaluation, and restrictions on foreign exchange. Nigeria's General Household Survey Panel data from 2012 and 2015, during periods of high oil prices, is compared with data from 2018 when oil prices had remained low, the currency had been devalued, and the treasury had been depleted. Alongside detailed descriptive statistics, logistic and hurdle regressions are employed for statistical analysis. Findings indicate a rise in the percentage of Nigerian households grappling with food insecurity from 2015 to 2018. During this period, 68.7% of households resorted to at least one coping mechanism, 31.8% adopted six or more coping strategies, and 43.2% resorted to severe coping strategies. The issue stems not primarily from natural disasters or conflicts but from a failure in macroeconomic and agricultural economic policies. Our findings confirm that these policies come at great cost, particularly to female‐headed households, single‐parent households, households headed by elderly people, and other vulnerable populations, pushing them deeper into food insecurity.

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.

PREDICTION OF CRUDE OIL PRICES IN INDONESIA USING FOURIER SERIES ESTIMATOR AND ARIMA METHOD

Crude oil is one of the non-renewable natural resources that is crucial for countries around the world in driving economic development. However, the availability of crude oil is decreasing over time. The high demand for crude oil results in scarcity which causes price fluctuations. Low oil prices can reduce state revenues, disrupt development programs, and even trigger budget deficits. On the other hand, an increase in crude oil prices can make a positive contribution to state revenues. Crude oil exports become more profitable, which can increase state revenue through royalties and taxes levied on the oil and gas sector. This additional revenue can be used to support infrastructure development, social programs, and investment in key sectors of the economy. High oil prices can also harm the economy. With the many impacts that can be caused by crude oil prices, the government must be able to anticipate and prepare for it. The data used in this study are data on crude oil prices in Indonesia for monthly periods from January 2018 to October 2023 sourced from the official website of the Ministry of Energy and Mineral Resources (ESDM) of the Republic of Indonesia. The researcher tried to compare two analysis methods, namely the Fourier series and the ARIMA estimator. The results of this study show that the best method in predicting crude oil prices in Indonesia is the Fourier series estimator with Cos-Sin function which produces RMSE and MAPE values of 7.93 and 8.4%. The prediction results can be used as a reference for the government to anticipate and make programs or policies that are more focused and targeted toward the impacts that can be caused by changes in crude oil prices.

Oil prices and the euro exchange rate

We use cointegration-based techniques to investigate the relationship between oil prices and the euro effective exchange rate taking also into account the influence of interest rates and stock prices. We find that higher oil prices cause a depreciation in the euro exchange rate (either nominal or real) in the short run. This suggests that during episodes of higher energy prices, the euro area consumer is faced with additional price pressures, as a depreciated euro causes import prices to further rise. Our study also indicates that as stock prices rise in the short and long term, the euro appreciates, while higher oil prices will likely result in overall higher policy rates and lower stock prices.

Investment decision analysis of shipping desulfurization project based on a fuzzy real option approach

ABSTRACT This study addresses shipping companies’ compliance with the International Maritime Organization’s 2020 sulfur emission limits, providing guidance for investment decisions in desulfurization projects. The paper uses a novel RCFM model, integrating real option theory (R), shipping cycle theory (C), fuzzy set theory (F), and Monte Carlo simulation (M). Key findings are: (1) During high oil price volatility, traditional binary tree models show computational distortions corrected by Monte Carlo simulation, whereas in lower volatility, the fuzzy binary tree model offers reliable investment intervals. (2) Investment in desulfurization depends on remaining vessel life and fuel price differences. For example, during the recovery period, for vessels with a remaining life of less than 5 years, investing in a desulfurizer is profitable if the fuel price difference exceeds $550/t and using low-sulfur fuel is advisable if below $400/t. For vessels of remaining life of 5-9 years, invest in a desulfurizer if the difference exceeds $500/t and use low-sulfur fuel if below $300/t. For over 9 years, invest in a desulfurizer if the difference exceeds $450/t and use low-sulfur fuel if below $200/t.

The detection of adulteration of olive oil with various vegetable oils – A case study using high-resolution 700 MHz NMR spectroscopy coupled with multivariate data analysis

Olive oil, being very salubrious, is one of the main ingredients of the Mediterranean diet. However, high oil prices combined with high consumption have increasingly subjected olive oils to fraudulent practices. The large rise in numbers of producers engaging in this illicit practice has made it necessary to develop a swift, convenient, and consistent analytical methodology to detect adulterating oil products and ensure product quality. In this study, we have merged multivariate statistical analysis with one-dimensional (1D) 700 MHz 1H nuclear magnetic resonance (NMR) to analyze different types of vegetable and olive oil.Additionally, we have spiked virgin olive oil with varying percentages (1%–75% (v/v)) of other vegetable oils to obtain the spectra of adulterated olive oil. As a result, the method applied in our study can not only detect adulterated olive oils but also identify mixed adulterants. Ease of sample preparation, quick sample analysis, and straightforward data comprehension distinguishes this method from the currently published ones.

Oil Market Dynamics and US Monetary Policy Uncertainty: Evidence from Explainable Artificial Intelligence Models

We utilize explainable artificial intelligence techniques to examine the main link between oil market dynamics and US monetary policy uncertainty. Our analysis unveils key findings. First, higher oil prices and rising oil market uncertainty are significantly associated with elevated levels of monetary policy uncertainty. Second, option-implied oil market volatility (an indicator of oil market uncertainty) emerges as the most important predictor of monetary policy uncertainty. Third, option-implied oil market volatility frequently interacts with option-implied gold market volatility while oil prices mostly interact with fluctuations in the US dollar. The findings offer valuable insights into the understanding of monetary policy uncertainty.

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 Prices and International Conflict: Why Low Oil Revenue May Not Pacify Petrostates

This article explores how declining oil revenue might shape the amount of international conflict initiated by major oil producers (petrostates). We analyze four potential mechanisms through which variation in oil prices could affect petrostate conflict initiation: emboldenment, battling over a smaller market, signaling strength, and diversionary conflict. The empirical findings suggest that higher oil prices are associated with lower rates of petrostate conflict initiation. From one standard deviation below the mean oil price to one standard deviation above it, the predicted number of militarized interstate disputes declines twofold, from .025 [95% CI: .016–.034] per petrostate per year to .012 [.007–.016]. Moreover, the evidence suggests that petrostates are more likely to target other petrostates when oil prices are low. This suggests that the energy transition may not be a boon for international peace among petrostates, and for a time, it may even prove to be the opposite.

Oil price uncertainty and excess value of diversification

PurposeThis study examines the value implications of oil price uncertainty for investors in diversified firms using a sample of 922 USA firms from 2001 to 2019.Design/methodology/approachOur study employs a panel dataset to examine the value implications of oil price uncertainty for diversified firm investors. We consider several alternative specifications to account for unobserved factors and measurement errors that could potentially bias our results. In particular, we use alternative measures of the excess value of diversified firms and oil price uncertainty, additional control variables, fixed-effects models, the Oster test, impact threshold for confounding variable (ITCV) analysis, two-stage least square instrumental variable (2SLS-IV) analysis and the system-GMM model.FindingsWe find that the excess value of diversified firms, relative to a benchmark portfolio of single-segment firms, increases with high oil price uncertainty. The impact of oil price uncertainty is asymmetric, as corporate diversification is value-increasing for diversified firm investors only when the volatility is due to positive oil price changes and amidst supply-driven oil price shocks. The excess value increases irrespective of diversified firms’ financial constraints and oil usage. Diversified firms become conservative in their internal capital allocations with high oil price uncertainty. Such conservatism is value-increasing for diversified firm investors, as it supports higher performance in response to oil price uncertainty.Originality/valueOur study has three important implications: first, they are relevant to investors in understanding the portfolio value implications of oil price uncertainty. Second, they are helpful for firm managers while comprehending the value-relevant implications of internal capital allocations. Finally, our findings are policy relevant in the context of the future of diversified firms in developed markets.

Oil prices and the load capacity factor in African oil-producing OPEC members: Modeling the symmetric and asymmetric effects

Most oil-producing economies are heavily dependent on oil. Although this situation allowed some of them to grow rapidly, particularly during high oil prices, it may have adverse environmental repercussions. The purpose of this research is to empirically investigate the symmetric and asymmetric effects of oil prices on the load capacity factor in seven African oil-producing OPEC countries between 1990 and 2018. The paper employs the PMG-ARDL model to estimate the symmetric effects of oil prices, while the asymmetric effects are obtained using the PMG-NARDL. The empirical findings suggest slope heterogeneity and cross-section dependence, while the Westerlund cointegration test confirms the existence of a significant long-run relationship. The PMG-ARDL test reveals no evidence of significant symmetric effects of oil prices on the load capacity factor in the short- and long-run. On the contrary, the PMG-NARDL model indicates that the load capacity factor is negatively affected by oil price increases, with short-run effects exceed long-run effects. These results still hold when employing the CS-ARDL and CS-NARDL models. Moreover, the results suggest the validity of the Load Capacity Curve hypothesis with a turning point ranging between 6674 and 7623 dollars per capita. Finally, the causality analysis confirms the previous results, as the load capacity is only caused by oil price increases.

Study the Performance and Emissions of Biodiesel Hydrofuel in Diesel Engine

The current situation of high prices of petroleum oil needs to be studied to find alternative fuels that can reduce some emissions. The use of biodiesel in a mixture of diesel fuel is an alternative to address the global crisis related to the depletion of petroleum reserves. Moreover, mixing biodiesel into diesel fuel can reduce some emissions such as CO, HC, and particulate matter. However, the NOx emissions are still high. The purpose of this study is to analyze the performance and emissions using diesel fuel with a mixture of deionized water (ratio 60:40) in comparison with Indonesian diesel fuel (B30). Test fuels are conducted in a diesel engine with different loads of idle, 36% and 68% with the engine rotation of 1500 rpm. The results show that mixing 40% deionized water with diesel fuel can reduce emissions of HC up to 0,29%, and NOx by 21,56% than diesel fuel at 68% load. Moreover, the specific fuel consumption can be down up to 3% more than diesel fuel. Therefore, deionized water fuel can be the solution to make better fuel properties, can reduce emissions, and be friendly to the environment.

Have the Chinese national oil companies paid too much in overseas asset acquisitions?

This paper provides both a quantitative and qualitative analysis of whether the Chinese national oil companies have “overpaid” than their international counterparts in overseas asset acquisitions during 2001–2017. Using a hedonic pricing framework, we find that while the Chinese companies did not pay more than international oil companies for the period of 2001–2008, there is statistically significant evidence that they overpaid during the 2009–2016 period. A counterfactual analysis was conducted to quantify the extent of the overpayment. Interviews and qualitative analysis suggest that the overpayment mainly results from a rush to gain projects in a period of high oil prices and easier bank loans after the global financial crisis rather than concerns about energy security or other political considerations.

Analysis of Sumatran Earthquake Coulomb Stress Changes in Geothermal Potential in Rianite, Samosir Regency

Increasing energy demand and high world oil prices are making countries turn to geothermal energy use. Indonesia is a country that has geothermal energy due to Indonesia's geographical location and geological conditions, which is located between three active earth plates so that Indonesia has 240 volcanoes and often experiences earthquakes. The 2003-2013 earthquake data obtained are coordinates, magnitude, depth, focal mechanism and all these data are analyzed in the coulomb stress method. Rianiate geothermal measurement data in March 2013 included geothermal location, hotspring and air temperature, pH, and geochemical measurements. The analysis results showed that the highest coulomb stress value was at a depth of 90 km of 0.56 bar while the shear and normal values were 0.452 bar and 0.251 bar. The result of the spread of coulomb stress is to the northeast, east and southeast. Then the results of the analysis of the direction of distribution of coulomb stress are compared to the location of the hotspring based on a decrease in temperature, the change in the potential of hotspring 1 leads to hotspring 2, 3, and 4 in the opposite direction, namely northwest or leads to the largest source of colulomb stress, so that Coulomb Stress Changes affect indirectly changes in the geothermal potential of Rianiate

To tax or to spend? Modelling tax policy responses to oil price shocks

Global crude oil prices surged in 2022 due to geopolitical conflicts, raising living costs worldwide. In response, policy measures such as fuel excise cuts and energy profits levies have been adopted by policymakers worldwide. We assess the efficacy of these two fiscal policy responses to temporary supply-side oil price shocks, using a dynamic general equilibrium model with rich fiscal and industry detail. Our focus is Australia, a distinctive country that functions both as an oil importer, and a liquefied natural gas (LNG) exporter. This dual role amplifies the inflationary pressure for Australian households and industries caused by an oil price rise, because the domestic LNG industry is largely foreign-owned and capital intensive. Inflated profits therefore flow offshore, and little of the terms of trade gain stemming from the oil-indexed LNG export price accrues to domestic economic agents. We find a temporary fuel excise cut can limit GDP and employment losses, but its effectiveness in relieving household cost-of-living pressure comes at the cost of increased net foreign debt. Higher oil prices also weaken the case for this policy from an allocative efficiency perspective. In contrast, an energy profits levy can stimulate national income without compromising the budget.

Buen Vivir, subjective poverty, and school conditions in 2017 Ecuador

AbstractIn May 2017 in Ecuador, the government of Rafael Correa handed over the presidency after 10 years and several mandates. His administration established the redefinition of the constitutional bases: the buen vivir cultural development and policy approach with a new transformative educational policy that sought to contribute to inclusion, overcoming inequalities, and poverty. His government benefited from high oil and commodity prices and broad popular support. This research has set out to review the results of the official national survey ENEMDU completed in December 2017. With a descriptive, bivariate, and multidimensional quantitative data analysis, we sought to shed light on the correlations between subjective poverty associated with buen vivir, school conditions, and ICT access and use of the school population in 2017. Results indicate a critical flaw in the buen vivir policies that failed to achieve their most valued and declared objective with indigenous and rural populations.

Synthesizing the role of urbanization and oil prices in achieving carbon neutrality in Africa: do financial crisis and renewable energy play a role?

Higher oil prices can incentivize urban planners to adopt energy-saving behaviors, such as using public transportation or investing in energy-efficient appliances, which can help achieve carbon neutrality. Notwithstanding this, empirical studies ignored the role played by oil prices in the urbanization-carbon emissions nexus. Therefore, this study aims to examine the moderating role of oil prices on the urbanization-CO2 emission relationship, along with renewable energy consumption and the global financial crisis. Using Driscoll-Kraay and IV-GMM techniques on panel data from 35 African countries, the results confirmed an inverted U-shaped relationship between urbanization and CO2 emissions in Africa, which is consistent with the ecological modernization theory. The results also show that oil prices, financial crisis, and renewable energy contribute to reducing carbon emissions, while the EKC hypothesis curve between GDP and CO2 emissions is validated. Additionally, urbanization has a favorable oil price effect on carbon emissions in Africa. The heterogeneity analysis validates the EKC curve between urbanization and CO2 emissions in low- and high-emission countries, while oil prices and financial crisis mitigate CO2 emissions only in low-emission countries. Further, oil prices moderate urbanization to reduce carbon emissions in low- and high-emission countries. The findings also indicated that renewable energy mitigates carbon emissions and that the inverted U-shape is confirmed in low- and high-emission countries. These results suggest that policymakers should put more effort into the adoption of renewable energy and the use of energy-saving technologies in urban development to achieve carbon neutrality.