High Crude Oil Prices Research Articles

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.

A Grand Challenge: Education and Advocacy in the New Energy World

_ This is the final article in a series of six 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 are 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. _ We have our work cut out for us… but then, we always have in our industry. Following the crippling effects of the oil embargo in 1973, the price of crude oil climbed high and fast to the top of the charts. That increase in crude oil value brought students to petroleum engineering programs in droves around the world. It was not just the crude; it was the value of the degree program. Students rightly saw an opportunity to work in an industry that fueled the engine of the global economy, lit their homes, warmed their food, and moved people around the continents, all reliably and affordably. The post-embargo peak in enrollment was only topped by the peak following the shale boom of the mid-2000s. After the post-embargo boom in the 1980s came the bust. Similarly, many of us were not left standing when the mid-2000 boom busted. The price of oil is climbing again; natural gas and crude oil use is up and consistently so, but the petroleum engineering enrollments are not (Fig. 1). Depending on where you started along the x-axis in your career (Fig. 1), you may already know this story. What’s different now in an industry known to be cyclical, where we’ve seen this before? If higher crude oil prices and concomitant salaries are not bringing in the students, what will? The demand for STEM graduates is high across industries, and it’s particularly acute in the oil and gas sector. The US faces a significant shortage of STEM graduates to meet the needs of critical industries. This scarcity raises concerns about our ability to fill specialized roles, such as petroleum engineering, which are crucial for the energy sector’s development over the next century. If we struggle to produce enough STEM graduates overall, how can we expect to meet the specific demands of the oil and gas industry in the coming decades? There are a few reasons for this new trend. More than half of Americans say that STEM studies are too hard and nearly a quarter believe that STEM studies are not useful for a career. The National Academies have been sounding the alarm for more than 20 years about where we are going technologically, as a nation, and who is going to get us there. Second, within STEM degrees in general, there are fewer petroleum engineering, or equivalent graduates. While additional energy types in the mix have been growing for years, the sharp move toward renewable energy and simultaneously painting hydrocarbons as undesirable is recent.

Analysing the rising oil price shock driven by Russia-Ukrainian tensions - effect on inflationary pressure in South Africa

Objective – The aim of this paper is to examine the relationship between the CPI, the brent crude oil price, and the PPI for final manufactured goods as well as the Rand/Dollar exchange rate during the past year. The study used South Africa as a proxy for developed countries. The objective is, therefore, to evaluate the effects of the increase in commodity prices on inflation and other macroeconomic variables. Methodology –The study utilised a quantitative methodological approach through the assessment of an econometric model that employed monthly data from January 2017 to May 2022. The paper utilized variables such as CPI, brent crude oil prices, PPI for final manufactured goods as well as the Rand/Dollar exchange rate. Findings – Short- and long-run relationships were established between the variables using the vector error correction model (VECM) and the Johansen co-integration equation methods. The long-run conclusions showed that high brent crude oil prices, high sunflower oil, a depreciating exchange rate and increasingly high PPI levels will lead to an increase in the CPI (Inflation). The results also indicated that oil prices still influence the basic prices of goods and services since all things need to be transported. Novelty – The results of the study showed that a perpetual international and national macro-economic environment is crucial to prevent inflationary pressures and price shocks, while volatile exchange rates unsteady PPI’s and significantly high oil and commodity prices causes cost-push inflation. Policy certainty and political stability is important to keep inflation stable and economic growth positive, which could lead to a more self-sufficient economy which are is reliant on political instability as an obstacle for positive future economic growth. Type of Paper: Empirical JEL Classification: E31, E37, E60, E63 Keywords: Russian-Ukrainian conflict, economic growth, Brent crude oil prices, PPI, CPI, exchange rates, sunflower oil. Reference to this paper should be made as follows: Neethling, J.R; Wyk, A.S.V. (2022). Analysing the rising oil price shock driven by Russia-Ukrainian tensions - effect on inflationary pressure in South Africa, J. Bus. Econ. Review, 7(3), 178–193. https://doi.org/10.35609/jber.2022.7.3(3)

Analyzing the rising oil price shock driven by Russia-Ukrainian tensions - effect on inflationary pressure in South Africa

At the onset of 2022 the Russian Federation occupied Ukraine in a major intensification of the Russo-Ukrainian War that instigated in 2014. The result of the Russians invasion in Ukraine caused a major intensification in the inflationary levels and weakened global economic growth. As a result of the conflict the Brent Crude Oil prices increased from $92.98 per ounce on 24 February to $122.43 per ounce on the 8th of June 2022 which is an increase of 31.67 per cent in less than 4 months. The result of this invasion reformed the macroeconomic environment which fundamentally affected the international commodity markets and consequently leading to insufficient financial linkages between Russia and the rest of the World. The aim of this paper is to examine the relationship between the CPI, the brent crude oil price, the PPI for final manufactured good as well as the Rand/Dollar exchange rate. The study used South Africa as a proxy for developed countries. A quantitative methodology was used through the estimation of an econometric model by utilizing monthly time series data from January 2017 to May 2022. The CPI was chosen as the dependent variable while the independent variables included the PPI, sunflower oil, Rand/Dollar exchange rate and the brent crude oil. Short- and long-run relationships were established between the variables using the vector error correction model (VECM) and the Johansen co-integration equation methods. The long run conclusions showed that high brent crude oil prices, high sunflower oil, a depreciating exchange rate and increasingly high PPI levels will lead to an increase in the CPI (Inflation). In conclusion, the results of the study showed that a perpetual international and national macro-economic environment is crucial to prevent inflationary pressures and price shocks, while volatile exchange rates unsteady PPI's and significantly high oil and commodity prices causes cost-push inflation. Policy certainty and political stability is important to keep inflation stable and economic growth positive, which could lead to a more self-sufficient economy which are not reliant on political instability as an obstacle for positive future economic growth. Keywords: Russian-Ukrainian conflict, economic growth, Brent crude oil prices, PPI, CPI, exchange rates, sunflower oil.

The Impact of Crude Oil Price Shocks on Bitcoin under the Russian–Ukrainian War

Nowadays, the Russian-Ukrainian war has been a hotly topic, and the war has shaken the global economy, especially in the international crude oil market. Also, as a popular financial instrument, the investors like to see Bitcoin as a hedging tool, but the problem of whether cryptocurrencies can hedge the volatility of commodity markets lacks a unified explanation. Therefore, the paper wants to find the relationship between Bitcoin and crude oil during the Russian-Ukrainian war. This paper uses data from Bitcoin, crude oil WTI futures, and crude oil Brent futures, and constructs the VAR model and ARMA-GARCH model based on these data. Ultimately, the article finds that the volatility of the international crude oil market only has little impact on Bitcoin. Thus, the investors do not need to worry about the high crude oil price caused by the war will affect Bitcoin’s yield and volatility, so Bitcoin seems like a great hedging instrument against the shock of the international crude oil market.

Modelling the Dynamic Interaction between Economic Policy Uncertainty and Commodity Prices in India: The Dynamic Autoregressive Distributed Lag Approach

This study examines the dynamic interaction between oil, natural gas, and prices with Indian economic policy uncertainty (EPU). The study finds that gold prices and industrial production are fundamental drivers of Indian economic policy uncertainty in both the short and long runs, using a dynamic autoregressive distributed lag (ARDL) model with monthly data ranging from January 2003 to July 2020. Gold prices are positively related to the Indian EPU, while industrial production is negatively related to it. Thus, investors in the Indian economy should use gold as a hedge for portfolio diversification and as a safe haven during an economic crisis. We also find a significant positive interconnection between gold prices and crude oil prices in both the short run and the long run, while the significant positive impact of natural gas prices on crude oil prices manifests only in the long run. The evidence also indicates that the EPUs of the US and Europe positively affect the Indian EPU, while the EPU of China does not have a significant effect. Higher crude oil prices are associated with higher gas prices, whereas higher gold prices are negatively associated with the natural gas price and vice versa. Furthermore, the evidence shows that the Indian EPU does not have a significant effect on the changes in the prices of goods.

A Simultaneous-Equation Model of Estimating Exchange Rate Pass-Through in Malaysia

Based on an extended IS-LM-AS model, this study finds that a 1% depreciation of the Malaysian ringgit tends to cause the CPI to rise by 0.1194%. Moreover, more M2 money supply, a lower government borrowing as a percent of GDP, a higher crude oil price, a higher U.S. CPI, and a higher expected consumer price index tend to raise Malaysia’s CPI. Therefore, exchange rate pass-through (ERPT) to the consumer price in Malaysia is partial and incomplete.

Effect of Higher Alcohol (Pentanol-Heptanol)–Biodiesel–Diesel Fuel Blends on the Performance and Emission Characteristics of a Direct-Injection Diesel Engine’s

Alternatives of fossil fuel resources as renewable biodiesel fuel and alcohols represents latest technology to be developed associated with the declining of fossil fuel resources along with higher crude oil price. In this study, four-stroke, single cylinder, and direct injection diesel engine performance and emissions are evaluated. The engine was running at variable speeds (1600-3000 rpm). 15% and 25% of pentanol and heptanol were added to the diesel-biodiesel mixture. The experimental results showed increasing in brake specific fuel consumption with the increasing of higher mass fractions of alcohol blends, which is attributed to the decreasing the lower heating value (LHV) of the blends. Higher brake thermal efficiency compared to diesel fuel was produced. An expressive reduction in carbon monoxide (CO) of (16.1% - 46.6% vol.) with total unburned hydrocarbons (UHC) decrease of (7.4% - 25.3% ppm), and nitric oxides (NOx) of (8.5% - 23.5% ppm). Biodiesel and alcoholic blends are suitable to be used as alternatives to diesel without the need for any modifications in conventional diesel engines.

Financial basis for the modern Russian economy

Subject. The article investigates the financial basis of the economy of contemporary Russia. Objectives. The focus is on identifying the financial basis of the modern Russian economy, the limits of economic activity, and conditions for economic development. Methods. The study rests on the systems approach, using the methods of statistical, neural network, and cluster analysis. Results. The paper unveils the need to study the financial basis of the modern Russian economy, which is caused by the duration of the transition from the socialist to capitalist socio-economic formation. The assessment of the growth rate of a wide range of statistical data reveals the financial basis of the modern Russian economy, i.e. direct investment, debt instruments, securities other than shares included in broad money, international liquidity, aggregate reserves, money supply. The existing financial basis limits the growth of gross value added, the increase in gross capital formation, etc. It also determines conditions for economic development, like high price of WTI crude oil and low price of gold, high gold price and the strength of the United States dollar. In the current structure of the Russian economy, both options lead to lower final consumption expenditure of the private sector and to limitation of stocks. Conclusions. The understanding of intermediate results of the long transition from socialist to capitalist socio-economic formation enables to define the boundary of the existence of the modern Russian economy. This boundary is generated by its raw material structure and financial basis.

Fuel riots: definition, evidence and policy implications for a new type of energy-related conflict

‘Fuel riots’ are a distinct type of energy-related conflict. We provide the first fuel riots database and explore their social, economic and environmental drivers. The analysis demonstrates links between fuel riots and high international crude oil prices in countries characterised by weak state capacity, deficient governance, fuel scarcity and poor economic performance. We suggest a potential causal pathway for fuel riots: when international fuel prices spike, net fuel-importing countries bear higher costs. If these countries are politically unstable and their government inefficient, the likelihood of fuel riots is high. Wealthier countries can absorb price increases and maintain subsidies, as opposed to poorer societies where fuel riots are more likely. Our findings demonstrate the role of state capacity and socio-economic conditions in enabling conflict, and will inform policy by identifying fertile ground for fuel riots, i.e. societies likely to be affected by increases in fuel prices due to scarcity and climate action (such as carbon taxes). We propose that policies which better control international prices and action designed to reduce political instability in vulnerable countries are key to preventing fuel riots. Fuel subsidy reform must anticipate popular opposition and mitigate the impact upon vulnerable populations in order to reduce the likelihood of instability and minimise hardship.

A Simultaneous-Equation Model of Estimating the Response of the Consumer Price to Exchange Rate Movements in Thailand

This paper examines exchange rate pass-through (ERPT) to the consumer price in Thailand based on a simultaneous-equation model consisting of the IS, LM and AS function. It employs comparative static analysis to determine the impact of a change in an exogenous variable on the equilibrium price level. The paper finds that a 1% depreciation of the Thai baht tends to cause the CPI to rise by 0.0696% and has declined since the adoption of inflation targeting in 2000. In addition, more money supply, more government deficit as a percent of GDP, a higher crude oil price, a higher U.S. CPI, and a higher expected price tends to raise Thailand’s CPI. The findings suggest that in addition to the exchange rate, other relevant variables such as fiscal policy, monetary policy, the crude oil price, U.S. price level and the expected price level are expected to impact the consumer price level.

Determinants of High Crude Oil Price: A Nonstationary Extreme Value Approach

There are a number of factors that influence crude oil prices. We use a nonstationary extreme value approach to model crude oil prices. The model includes world oil demand, supply, dollar index, oil consumption, geopolitical and economic events as exogenous factors influencing crude oil prices. We assess the change in crude oil price dynamics as the consequence of changes in covariates. The primary objectives of the study are as follows: firstly, to investigate the impact of some exogenous variables on high crude oil prices; secondly, to fit the best nonstationary generalized extreme value model; thirdly, to compute the return level of crude oil prices for certain values of exogenous variables; fourthly, to compute the probability of crude oil prices which are extreme in nature; and finally, to measure the relative risk of a high oil price due to different covariate values. The finding shows that it is reasonable to model extreme oil prices using the nonstationary extreme value approach as opposed to the stationary approach. Moreover, the study shows that some of the independent variables considered here have significant roles in high crude oil prices and their changes create high risk of occurring extreme crude oil prices.

Ranking of US macroeconomic news impacting WTI crude oil volatility risk

This study had the purpose to investigate the impact of 38 scheduled major United States (US) macroeconomic news on WTI crude oil intraday volatility for the period 2012-2018. It was the aim to provide a news ranking that indicates upcoming high volatility episodes at a specific point in time. The West Texas Intermediate (WTI) light crude oil represents a benchmark since it has a signal effect on market players. High crude oil price volatility is a measure of risk and known to increase inflation, to affect producers, consumers, and investors and to destabilize economic growth. In this research approach one-minute high-frequency bid close prices provided the basis for a 1h window rolling standard deviation. Data modeling was performed using simple and multiple robust ordinary least squares (OLS) regression performed with programming language Python. The model successfully identified 21 significant news announcements in both, the simple and multiple regression models, however, simple OLS-regression appears to be more sensitive. It also provided a ranking of US news impacting WTI volatility risk. The results support the prediction of approaching high price volatility and thus, display an opportunity for market participants and decision-makers to minimize risk.

Multiple Breakpoint Test on Crude Oil Price

Abstract The impact of structural changes as well as breaks on oil price fluctuations is studied in this article. There are a few channels, such as domestic prices and inflation, that cause the effect of oil price to pass through the economy. The higher crude oil price is immediately followed by the increase in oil products such as gasoline and heating oil. The direct effects continue as people choose alternative energy sources, leading to the increase in price. Besides, the indirect effect on inflation as a result of the behavioral responses of the firms and workers which is known as the “second round” effects in which higher wages is being demanded. This article uses exploratory data analysis to discover the patterns of the variables’ series and then examines the relationship between oil price and consumer price index. Multiple breakpoint test is thereafter used to identify the structural changes in time-varying variables.

Identify Energy Savings Opportunities from Operational “Self-Help “and “Quick Fix” Optimization Approaches

The objective of this paper is to describe the importance of formation of a pragmatic Energy Optimization Program (EOP) at the concerned oil and gas facilities. Substantial amount of energy savings can be realized by focusing on initiatives that require no investment or so called “self-help” that can easily be implemented without further a due. A “quick fix” initiative involves a nominal investment; it can also be easily executed without the need for detailed project justification. Given the increasing expectations to oil and gas organizations to maintain a competitive edge in the modern global economy have caused the instability of crude oil as the world’s major commercial energy source for the next coming years and greater commitment to reduce greenhouse gas (GHG) emission. Regardless of during high or low crude oil price, energy is certainly a critical business continuity driver for both users and producers. Having significantly greater EOP to explore energy savings opportunities require many efforts including new efficient equipment, new technology, new processes and approaches which should be given a priority. Ideally, EOP focused team shall effectively participate in early design stage of project, so that all significant energy efficiency concepts will be considered in the design. In reality, many energy efficiency efforts may be missed out as a result of loose energy efficiency definition, less competency of design engineers, hectic project schedule and/or resource constraint.

The effect of the oil and gas boom on schooling decisions in the U.S

The development of cost-effective technologies, along with high crude oil and natural gas prices, accelerated shale oil and gas extraction in the United States in the early 2000s. We explore the schooling response to this boom, taking advantage of timing and spatial variation in well-drilling activities. We show that intensive drilling activities decreased grade 11 and 12 enrollment over the 14-year study period—41,760 fewer students enrolled per year across the 15 states considered in this analysis (95% C.I.: 12,685–71,567). We investigate heterogeneous effects and show that the effect was larger in states with a younger compulsory schooling age (16 years of age instead of 17 or 18), in states with a lower effective tax rate on oil and gas production, and in non-metro counties with traditional mining or persistent poverty.

Are US gasoline price responses asymmetric? Another look

This study examines the possible 'rockets and feathers' effect by focusing on daily spot gasoline and crude oil prices. Our test results for 1986-2017 reveal a significant directional association between gasoline and crude oil prices; the proportion of days in which crude oil and gasoline prices move in the same direction is 0.75, and the proportion of days in which crude oil and gasoline prices both rise (fall) is 0.74 (0.76). Further findings reveal no evidence in favour of asymmetry in gasoline prices, as gasoline prices rise more than crude oil prices by an average of 0.20% but also fall more than crude oil prices by a similar average of 0.18%. These conclusions remain unaltered for two approximately equal sub-periods of 1986-2002 and 2002-2017 which are characterised, respectively, by relatively low and high crude oil and gasoline prices.

The impact of oil price changes on major US tight oil plays

ABSTRACTUS oil production for the last decade has been revolutionized by tight oil development activities around the country. The main oil plays contributing approximately 50% of the US total daily production are the Permian, Bakken, Eagle Ford, and Niobrara plays. Among the factors sustaining this tight oil revolution are advanced well positioning technology undergirded by high crude oil prices. Since the fourth quarter of 2014, oil prices have dropped from highs of $105/bbl observed in 2013 to lows of $28/bbl, leading to seismic shifts in activities across the oil plays. However, these impacts have not been uniform across all plays. This paper examines the varied impact of crude oil price fluctuations on the nation’s top tight oil plays. Using an autoregressive distributed lag (ARDL) approach, this study investigates the effects of oil prices and rig counts on oil production in these plays. The results show that oil price fluctuations affect all tight oil plays differently. Plays like the Permian show more resilience even amidst the oil price crash and plays like the Bakken are impacted in the short and long run by oil price fluctuations. This study also shows that the long-run impact of price fluctuations is not symmetrical and oil production increase caused by a rise in price is more sustained than production drops that follow price declines. In an era of lower oil prices, these insights become even more valuable to decision makers and operators who search for opportunities to stay profitable.

Modelling and Forecasting Rig Rates on the Norwegian Continental Shelf

Knowledge about rig markets is crucial for understanding the global oil market. In this paper we first develop a simple bargaining model for rig markets. Then we examine empirically the most important drivers for rig rate formation of floaters operating at the Norwegian Continental Shelf in the period 1991q4 to 2013q4. We use reduced form time series models with two equations and report conditional point and bootstrapped interval forecasts for rig rates and capacity utilization. We then consider two alternative simulations to examine how the oil price and remaining petroleum reserves influence rig rate formation of floaters. In the first alternative simulation we assume a relatively high crude oil price equal to 100 USD (2010) per barrel for the entire forecast period, whereas the reference case features the actual oil price with extrapolated values for the last quarters in the forecast period. According to our results, the rig rates will be about 34 percent higher in 2016q4 with the higher oil price. In the second alternative simulation we explore the effects of opening the Barents Sea and areas around Jan Mayen for petroleum activity. This contributes to dampening the fall in the rig rates and capacity utilization over the last part of the forecast period.

Complement or substitute: Ethanol’s uncertain relationship with gasoline under alternative petroleum price and policy scenarios

Ethanol demand depends on the crude oil price and domestic biofuel mandate, but the aggregate effect on consumer fuel choices and export demand is uncertain. The relationship between crude oil and ethanol price is complex, and the presence of policy driven domestic biofuel use (mandate) make the modeling of the world ethanol market challenging. A structural economic multi-market multi-region partial equilibrium model considering the complementary and substituting effects between gasoline and ethanol demand is developed. In this study, a kinked ethanol demand curve that reflects those relationships is used to depict ethanol demand. We further simulate two forward-looking alternative crude oil price scenarios to identify how the crude oil price interacts with ethanol use mandates and trace the consequences on the U.S. Renewable Identification Number (RIN) market. The study finds that, under high crude oil prices, the substitution effect might trigger a large increase in ethanol demand by the rest of the world and the U.S. and Brazil will be the key ethanol exporting countries. In the U.S., the overall biofuel mandate might become non-binding.