Increase In Crude Oil Prices Research Articles

The Relationship between Crude Oil Price Fluctuations and Economic Growth in Tanzania

This paper studies the relationship between crude oil price fluctuations and economic growth in Tanzania employing a Vector Error Correction Model (VECM) to capture both short-run and long-run relationships from annual secondary time series data from 1988 to 2022. The ADF and PP unit root tests were used to check for stationarity and the variables became stationary at first differencing (I(1)). Johansen cointegration tests revealed at least one cointegration vector, indicating a strong long-run relationship among variables. Long-run equations were estimated using least squares, short-run equations were estimated using error correction model, and Granger causality tests were conducted to analyze dynamic relationships. Model diagnostic tests included the Jarque-Bera test for normality, the Lagrange multiplier for autocorrelation, and the Eigenvalue stability condition for model stability. The findings revealed that in the short run, the relationship between crude oil price fluctuation and GDP is insignificant, indicating that immediate fluctuation in oil prices does not significantly impact economic growth. However, there is a negative relationship between crude oil prices and GDP in the long run, reflecting the adverse impact of prolonged increases in crude oil prices on economic growth. Granger causality tests provided compelling insights, as crude oil prices and interest rates unidirectionally drive GDP, while GDP exhibits a bidirectional causality with both inflation and exchange rates. Moreover, the joint influence of these variables has a significant impact on GDP. The study recommended that in the long run, the diversification of energy sources to reduce dependency on oil import while broadening the economic base. In the short run, strategic oil reserves and financial instruments are to be used in managing crude oil price fluctuations. Furthermore, the study recommends that policymakers consider complex interrelationships among the variables when analyzing economic growth and when making policy decisions.

The position of Indonesia’s palm oil in the vegetable oil international market

Abstract The increase in global crude oil prices and awareness of energy sustainability are driving the development of the biofuel industry. Palm oil has high productivity and competitive prices compared to other vegetable oils, encouraging competition among major palm oil exporters and significant vegetable oils. The research examines factors influencing Indonesia’s position in the global vegetable oil competition and assesses how economic shocks impact Indonesian palm oil competitiveness. This study utilized the Almost Ideal Demand System model on secondary data in the time series period of 1990-2022. The research results showed that the increase in global income is the most influential factor in the rise in the market share of Indonesian palm oil. The increase in crude oil prices favored the position of Indonesian palm oil compared to Malaysia. Fluctuations in Malaysian palm oil prices could affect the competitiveness of Indonesian palm oil. Malaysia’s palm oil, soybean oil, and sunflower oil are more complementary than Indonesia’s. Indonesia needs to collaborate with significant vegetable oil exporters, to create a palm oil commodity exchange, and to synchronize policies from upstream to downstream to ensure the fulfillment of domestic and export palm oil needs.

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.

MODELING OF WORLD CRUDE OIL PRICE BASED ON PULSE FUNCTION INTERVENTION ANALYSIS APPROACH

Crude oil has important role in global economy, including Indonesia with considerable dependence on crude oil energy consumption. The increase in crude oil prices can be triggered by several factors, one of which is geopolitical conflict that occurred due to Russia's invasion of Ukraine on February 24, 2022. As the result, world crude oil prices rose above US$100 per barrel for the first time since 2014. Therefore, this study uses pulse function intervention analysis approach to evaluate the impact of certain events in predicting data over the next few periods. The pulse function is used because the intervention occurs at the moment t only. The data used starts from June 8, 2020 to September 19, 2022 on weekly basis with the proportion of training and testing data is 90:10. The best intervention model obtained is ARIMA (3,2,0) with b=0, s=1, r=2, and intervention point at T=91. The prediction results for the next 12 periods obtained MAPE value of 2.8982% and MSE of 10.2687. This study is expected to help reduce risks due to uncertainty in world crude oil prices and in line with the goals of the Sustainable Development Goals (SDGs) to ensure access to reliable, sustainable, and affordable energy.

Navigating the Energy Trilemma: Oil and Gas Industry Making Strides

_ Energy is vital to human flourishing. Since the dawn of time, humans have sought to find more efficient ways to power and propel their lives forward. With each generation, we’ve made progress in unlocking energy density—moving from burning wood for warmth inside caves thousands of years ago through our current age, where a revolution in modern energy is transpiring. However, recent global events have certainly tested the upstream oil and gas sector’s “can-do” attitude and spirit of innovation. In the 3 years since West Texas Intermediate Crude (WTI) futures dipped below zero—dropping more than 300%—to settle at negative $37.63/bbl, there has been a global COVID-19 pandemic and recovery, supply chain and logistical challenges, and a war. The oil and gas industry is more adept at riding the market volatility wave than in the past. WTI futures climbed out of the negative, reaching as high as $123.70/bbl on 8 March 2022, as the pandemic began to ease, and the lockdown ended in many regions worldwide. Geopolitical tension with Russia and its full-scale invasion of Ukraine in the first half of 2022 contributed to the crude oil price increases. Also contributing to higher pricing in the first half were concerns over supply levels. The Russian invasion of Ukraine came during eight consecutive quarters of crude oil level decreases, according to the US Energy Information Administration (EIA). In the year since, the price has dropped but not nearly as profoundly, with recent prices ping-ponging in the mid-$60 to mid-$80/bbl range. The EIA cited as reasons for the lower price concerns over a possible economic recession and China’s severe COVID-19 containment measures as keeping global demand lower. The Russian invasion of Ukraine turned global markets upside down. The International Energy Agency (IEA) cited it as the trigger of a worldwide energy crisis that “has the potential to hasten the transition to a more sustainable and secure energy system,” in its World Energy Outlook 2022. “Energy markets and policies have changed as a result of Russia’s invasion of Ukraine, not just for the time being, but for decades to come,” said IEA Executive Director Fatih Birol at the time of the outlook’s release. “Even with today’s policy settings, the energy world is shifting dramatically before our eyes.” Transition and Trilemma The energy transition changes how the world views and uses oil and gas. While it is not the first energy transition the world has faced, it is proving to be the most significant and complicated. “It is needed if we are to prevent the 1.5°C increase in temperature,” Kjetil Hove, the executive vice president of development and production in Norway for Equinor, said during his keynote address at the SPE/IADC International Drilling Conference and Exhibition held in Stavanger on 7 March. “The future carbon intensity of the energy mix needs to be reduced significantly. Last year’s energy crisis and the war in the middle of Europe showed that the energy transition needs to be done wisely and that it addresses the energy trilemma,” he said.

Impact of New Energy Vehicle Development on China’s Crude Oil Imports: An Empirical Analysis

Breaking the highly oil-dependent energy use structure in the transportation sector will be crucial for China to reduce its dependence on crude oil imports and ensure its energy security, and the development of new energy vehicles is helping to break this dilemma. A time series analysis summarizes the possible relationships between new energy vehicles and crude oil imports, i.e., new energy vehicles, as alternatives to fuel vehicles, will reduce the demand for oil in the transportation sector, which will in turn reduce crude oil imports, and crude oil prices and crude oil production will inhibit crude oil imports. In this empirical study, monthly data from 2015 to 2021 on crude oil imports, the market share of new energy vehicles, crude oil prices, and crude oil production are selected, time-series multiple regression modelling is adopted, and endogeneity is treated using a generalized method of moments (GMM). The regression results show that crude oil imports decrease by one unit for every 16.32% increase in crude oil prices, indicating that price factor is the most influential factor in China’s crude oil imports, while crude oil imports decrease by one unit for every 133.99% increase in crude oil production, indicating that an increase in crude oil production contributes less to the reduction of crude oil imports. One unit of crude oil imports is added for every 15.53% increase in the share of new energy vehicles, indicating that the effect of new energy vehicles on limiting crude oil imports has not yet emerged. Probably due to the fact that new energy vehicles have not yet had a significant impact on fuel vehicles, oil consumption will continue to increase in the short and medium term, with oil for the petrochemical industry becoming the primary driver of this increase. Finally, policy implications are provided from the perspective of crude oil demand, supply, and China’s oil price mechanism.

How did the 2021-2022 energy shock impact the prices of transport services for consumers across EU countries?

This paper analyses the spillover effects oil price movements to consumer prices of transportation services in 27 EU countries, employing fixed-effects panel data estimation on the period from 2020 to 2023. This is the period of a sudden surge in global crude oil prices driven primarily by supply bottlenecks and the conflict in Ukraine. We analyze spillover effects on transport services prices as an aggregate, and separately for different modes of passenger transport, which include air passenger transport, sea and waterway passenger transport and railway passenger transport. We find that the effect of crude oil price on the Harmonized Index of Consumer Prices (HICP) of transport services is positive and statistically significant at 5% level. However, the effect of crude oil price on HICP of transport services varies across countries and different modes of passenger transport. The effect of crude oil price increase is less pronounced for road transport than for air and sea and waterway passenger transport, while the highest effect is estimated for air passenger transport. In contrast, recent oil price shock did not have a statistically significant effect on HICP of passenger railway transport. Overall, recent oil price shock had a limited impact on consumer prices of transport services in the EU. This can be mainly attributed to the implementation of targeted policy measures across the EU aimed at mitigating the inflationary effects of the global energy crisis.

Equity premium prediction using the price of crude oil: Uncovering the nonlinear predictive impact

Highly cited studies, such as Mork (1989), Hamilton (1996), Hamilton (2003) and Kilian and Vigfusson (2013) establish a nonlinear connection between movements in the real (nominal) price of crude oil and the real gross domestic product (GDP) growth rate. Based on the observation that crude oil price increases have a different impact on the real GDP growth rate than crude oil price decreases, the authors introduce various nonlinear transformations of the price of crude oil to account for the nonlinear predictive impact. Using predictive regressions à la Goyal and Welch (2008), a growing number of studies in recent years have conditioned on these nonlinear crude oil price measures to predict equity premium out-of-sample. By applying the dynamic rotation rule suggested in Zhu and Timmermann (2021), we demonstrate that the form of nonlinearity that helps improve relative out-of-sample point prediction accuracy the most does not have to do with crude oil price increases (decreases) relative to recent prices as perceived by the current literature, but with connecting the relative out-of-sample point prediction performance between the benchmark and the crude oil price-based model with movements in economic variables measuring equity market volatility, economic activity, uncertainty and financial conditions. The statistical evidence of out-of-sample equity premium predictability also translates to economic gains.

Dependence structure between the international crude oil market and the European markets of biodiesel and rapeseed oil

Being an environmentally friendly fuel obtained from rapeseed oil, biodiesel is used extensively in Europe. However, the dependence structure between global crude oil prices and the European prices of biodiesel and rapeseed oil is understudied and unclear. In this paper, we address this gap by utilizing asymmetric copulas and cross-quantilogram approaches on daily data. The results of the DCC-Student-t copula indicate that during bearish periods the conditional connectedness between crude oil prices and biodiesel (rapeseed oil) prices are stronger than during bullish periods, indicating increased co-movement with a decline in crude oil prices. The application of cross-quantilogram indicates that an increase in crude oil price positively influences biodiesel prices reflecting an asymmetric dependence structure among the assets. There is evidence of shifts in the dynamics of quantile dependency during periods of financial and economic turmoil. Overall, the results show a significant dependence between the global crude oil market and the European markets of biodiesel and rapeseed oil in specific periods and under specific market conditions, which have important implications for policymakers and investors.

Understanding the conditional out-of-sample predictive impact of the price of crude oil on aggregate equity return volatility

Using monthly data from 1973 through 2020, we explore whether it is possible to improve the accuracy of one-month ahead log-aggregate equity return realized volatility point forecasts by conditioning on various nonlinear crude oil price measures widely relied on in the literature. When evaluating the evidence of unconditional relative equal predictive ability as specified in Diebold and Mariano (1995), we observe that similar to well-known economic variables, such as the dividend yield, the default yield spread and the rate of inflation, we rarely observe evidence of statistical gains in relative point forecast accuracy in favor of the crude oil price-based models. However, when evaluating the evidence of conditionalrelative equal predictive ability as specified in Giacomini and White (2006), we observe that contrary to well-known economic predictors, certain nonlinear crude oil price variables, such as the one-year net crude oil price increase suggested in Hamilton (1996) offer sizable point forecast accuracy gains relative to the benchmark. These statistical gains can also be translated into economic gains.

Analysis of the Economic Impact of International Crude Oil Price Fluctuations on China

This paper analyzes and examines the impact of international crude oil price fluctuations on China's economy. By constructing an SVAR model between crude oil prices and China's economy, prices and monetary policy, we study the impact of crude oil price fluctuations on some important economic indicators in China and explore their intrinsic relationships. The empirical results show that the increase in crude oil prices has a significant positive impact on the consumer price index and producer price index; it has a negative impact on industrial production in the short term, but fails to change its overall development trend. Overall, the economic system based on crude oil prices is stable, despite the fact that international crude oil prices are influenced by various complex and variable international factors.

The dynamic moderating function of the exchange rate market on the oil-stock nexus

Oil price movements have an important impact on the stock market, and this impact could be dynamically moderated by the exchange rate, which could not be effectively depicted by VAR or GARCH methods widely used in previous studies. This paper adopts a more flexible nonlinear model to investigates this dynamic moderating effect of the exchange rate market on the oil-stock nexus for 45 major countries from November 30, 2005 to November 22, 2019. We also compare the differences in this moderating effect between oil-importing and oil-exporting countries and confirm the presence of a wealth transfer effect. Specifically, the empirical results show that (1) In the stage where domestic currency depreciation or appreciation degree is not serious (the growth rate is less than 0.1), an increase in crude oil prices has a positive impact on stock market returns, and this positive impact is weakened when the growth rate of the exchange rate return approaches zero. (2) As the local currency continues to appreciate (the growth rate is greater than about 0.22), the increase in crude oil prices may negatively influence stock market returns to an increasingly greater extent among crude oil importers. (3) The increase in crude oil prices may have a short-term positive impact on stock market returns in oil-exporting countries due to the wealth transfer effect when the domestic currency appreciates at a faster rate. Finally, we discuss the policy implications of our findings to help investors avoid risks due to fluctuations in international oil prices.

Stability in the banking industry and commodity price volatility: perspective from developing economies

PurposeThis paper aims to examine the effect of volatility in prices of internationally traded commodities (the backbone of most economies) on the stability of the banking industry from three main perspectives; bank liquidity reserves, overall bank risk and bank capital adequacy.Design/methodology/approachData were compiled from various sources for 30 emerging economies from 2002 to 2018 and were analyzed using the two-step system generalized method of moments estimation technique.FindingsThe study finds that all things being equal, the magnitude and direction of impact of commodity price volatility on bank stability among economies in Sub-Saharan African (SSA) depend on the type and nature of the commodity in question; and the bank stability proxy used. For instance, an increase in crude oil prices is found to foster stability in the banking industry (proxied by bank liquid reserves) but insignificant when stability in the banking industry is proxied using other banking sector parameters. Additionally, government effectiveness and corruption control have varying moderating influences on how volatility associated with prices of internationally traded commodities influence various proxies for banking industry stability.Originality/valueThis study highlights the effect of fluctuations in prices of key internationally traded commodities (adjusted for foreign exchange impact) that are important sources of revenue among economies in SSA on banking sector stability from liquidity, overall risk and capital adequacy perspectives. The influential role of governance in the relationship between volatility in the price of commodities and bank stability is also revealed by the study.

IS BITCOIN A SAFE HAVEN? A STUDY ON THE FACTORS THAT AFFECT BITCOIN PRICES

Bitcoin and other digital currencies are financial assets with high volatility, which calls for an investigation of the factors that influence their prices and thus has led to a debate on whether they are reliable investment instruments or diversification tools. The present study aims to explore the impact upon Bitcoin prices of commodities such as gold and oil, the S&P 500 index, and the volatility index and financial stress index, which represent the financial risk environment. To this purpose, we analyze this relationship using the Autoregressive Distributed Lag (ARDL) approach based on the monthly data from the 2010-2021 period. The results suggest that both in the long and short run, gold price per ounce does not have a statistically significant effect on Bitcoin price. On the other hand, an increase in crude oil prices has a negative impact on Bitcoin price in the short run, with no significant effect in the long run. The S&P 500 stock market index positively affects the Bitcoin price both in the short and long run. In addition, our analysis results also demonstrate that developments indicating increased risk in the long run tend to reduce Bitcoin returns.Keywords: Bitcoin, gold, oil, volatility, ARDL.JEL Classifications: G11; B23DOI: https://doi.org/10.32479/ijefi.11602

Crude oil prices pass-through to retail petroleum product prices in Nigeria: evidence from hidden cointegration approach

This study produces the first-ever analysis in Nigeria on the asymmetric response of petroleum product prices to international crude oil prices by employing the hidden cointegration approach on quarterly data spanning from 1973Q1 to 2020Q2. After the preliminary tests of data description, unit root analysis and cointegration test, we find that positive and negative components of both the crude oil and petroleum prices move together in the long run. The result suggests evidence of long-run asymmetry in Nigeria. The empirical findings from both the long-run and short-run results show that petroleum prices in Nigeria respond asymmetrically to changes in crude oil prices. Specifically, the outcomes from the study reveal that positive changes (increase) in crude oil prices produce a larger and stronger effect on petroleum prices than the effect of negative changes (decrease) in crude oil prices indicating evidence of an asymmetric relationship between the two prices in Nigeria. Thus, the findings confirm the existence of the rocket and feather hypothesis in the retail energy market in Nigeria. Overall, the study finds convincing evidence to support the hypothesis of “rocket and feather” in the pass-through effect of crude oil prices on petroleum prices in Nigeria. The study advocates for more government intervention in the energy market to reduce the welfare loss associated with an increase in crude oil prices on the citizens.

Dynamics of Crude Oil Price Change and Global Food Commodity Prices

Purpose: This study investigates the effect of crude oil price fluctuations (price change as well as volatility) on wheat, sugar, corn, and fertilizers price changes. 
 Methods: The study employs Markov switching dynamic regression, Dynamic Conditional Correlation (DCC), and Generalized Autoregressive Conditional Hetrosekadicity (GARCH) on monthly data covering the period from January 1988 to April 2018.
 Results: The findings of the research support evidence of two states. State 1, pertains to the low volatility of crude oil price, and state 2 belong to the case of the high volatility of crude oil prices. Our results indicated that at state 1, an increase in crude oil prices leads to a decline in food commodity prices, while in state 2, an increase in crude oil price levels causes an increase in food commodity prices. Results of Dynamic Conditional Correlation (DCC) GARCH estimates indicate the coefficients of oil price levels are significant and positively associated with the conditional volatility of the four commodity prices.
 Implications: The findings of the research imply that volatility in global food commodity prices is not due to oil price volatility but due to the oil price levels attained at extreme points.
 Originality: The paper investigates the impact of different volatility levels of crude oil prices on global food commodity prices.

An Empirical Investigation into the Effect of Global Oil Price on Nigeria Gross Domestic Product from (2000-2019)

Nigeria is one of the largest oil producing countries in the world, its revenue is largely dependent on crude oil sales. The country vulnerability to crude oil price fluctuations is a phenomenon that has been a reoccurring event Thus; this study aims to examine the impact of Global crude oil prices on Nigeria gross domestic product (GDP) and the economy at large. The study relied deeply on secondary data obtained from the Central bank of Nigeria (CBN). The data were subjected to simple regression analysis, Pearson Product Moment Correlation to determine the effect and relationship between oil price (Independent Variable) and Nigeria GDP (dependent variables). And time series analysis was also used to examine the trend in the data set and fit a more parsimonious model that would aid forecasting of future crude oil price and GDP. The study found that Global crude oil price have a significant correlation with Nigeria gross domestic product, %58.1 of variation in Nigeria gross domestic product is attributed to fluctuation in Global crude oil price and Nigeria GDP will increase by ₦4.21bn per unit increase in crude oil price. The study thus conclude that global crude oil price has a significant impact on Nigeria GDP and its economy at large. The study among others recommend diversification of the Nigerian economy is most imperative given the economic recession in the country now and the impending take-over of the transportation industry by electric vehicles. Keywords: Oil price, Gross domestic product, Economy, Price shock, Exchange rate, Nigeria. DOI: 10.7176/EJBM/13-4-03 Publication date: February 28 th 2021

Impact of FDI inflow, crude oil prices, and economic growth on CO2 emission in Tunisia: Symmetric and asymmetric analysis through ARDL and NARDL approach

This study explores the symmetric and asymmetric impact of real GDP per capita, FDI inflow, and crude oil price on CO2 emission in Tunisia for the 1972–2016 period. Using the cointegration tests, namely ARDL and NARDL bound test, the results show that the variables are associated in a long run relationship. Long run estimates from both approach confirms the validity of ECK hypothesis for Tunisia. Symmetric analysis reveals that economic growth and the price of crude oil adversely affect the environment, in contrast to FDI inflows that reduce CO2 emissions in the long run. Whereas the asymmetric analysis show that increase in crude oil price harm the environment and decrease in crude oil price have positive repercussions on the environment. The causality analysis suggests that a bilateral link exists between economic growth and carbon emissions and a one-way causality ranges from FDI inflows and crude oil prices to carbon emissions. Thus, some policy recommendations have been formulated to help Tunisia reduce carbon emissions and support economic development.

CRUDE OIL PRICES, HOUSEHOLD SPENDING AND ECONOMIC GROWTH IN THE ASEAN-4 REGION: AN ANALYSIS OF NONLINEAR PANEL AUTOREGRESSIVE DISTRIBUTED LAG

This paper looks at the long run and short run asymmetric impact of crude oil prices on Indonesia's economic growth. It also assesses whether household spending affects the economic growth in the ASEAN-4 Region (Indonesia, Singapore, Thailand and the Philippines) in the long run and short run. We use, to this end, annual time series data of crude oil prices, household consumption expenditure, and GDP for the period 1967-2018. To analyze the data, we employ a nonlinear panel autoregressive distributed lag model. The test results provide evidence that in the long-run, crude oil prices have an asymmetric impact on economic growth. Every 1% increase in crude oil prices, economic growth rises by 0.42%. Meanwhile, household spending does not affect economic growth in the long-run. Furthermore, in the short run, the test results show the presence of an asymmetric impact of crude oil prices on economic growth. Similarly, in the short run, household spending affects economic growth. Keywords: Crude Oil Prices, Household Spending, Economic Growth, Nonlinear Panel Autoregressive Distributed Lag Model. JEL Classifications: C33, E210, E310, O470. DOI: https://doi.org/10.32479/ijeep.9293

Oil price shocks and the composition of current account balance

It is a well-established regularity that permanent oil price shocks do not have a permanent effect on the current account deficit. This requires that sub-components of the current account or trade balance will make the necessary adjustments to accommodate the higher energy bill of a country triggered by permanent crude oil price increases. Empirical evidence gathered from Turkey reveals that, in the long run, balancing the current account is provided by a permanent increase in the net exports of Agricultural Production, Maintenance and Repair Services, Travel, Construction, Financial Services, Compensation of Employees, and Goods under Merchanting (non-tradable components of the current account balance); and a permanent decrease in the net exports of Mining, Fishery, Other Goods for BEC Classification, Investment Income, Manufacturing Services on Physical Inputs Owned by Others, and Transport balances mostly in sectors that use energy heavily in production. All these responses are found to be statistically significant in the more than 24 periods we consider in this study.