Net Oil Exporter Research Articles

The differential effects of oil price shocks on exchange rate, inflation, and monetary policy rate in Ghana

This paper investigates the differential effects of oil price shocks on exchange rate, inflation, and monetary policy rate in Ghana. The paper also introduces the trade weighted U.S. dollar-major currencies index as another measure for identifying the speculative component of the real price of oil. To execute its objective, the paper employed a two-step estimation technique and monthly data from 1973 to 2018. The two-step method involves structural VAR in the first step and OLS regressions in the second step. Full sample estimation results indicate that oil price shocks are inconsequential to exchange rate, inflation, and monetary policy rate in Ghana. Furthermore, when the sample is split into two sub-periods, the study did not find the fact that Ghana switching from a net oil-importer to a net oil-exporter have any deferential effect. Taken together, the findings suggest that even in emerging and developing countries, a fading relationship between oil price shocks and macroeconomic indicators could exist.

Oil Price Shocks and Economic Growth in Oil-Exporting Countries

The aim of this paper is to investigate how major net oil exporter economies react to oil price shocks. We contribute to the literature by considering, at the same time, the possible nonlinearity and asymmetry of this relationship with respect to sign, size and causes of the oil price shocks, as well as the state of the economy in which the shocks occur. We apply a Threshold Structural VAR approach, characterized by a separation of the observations into different regimes based on a threshold variable, to model time series non-linearities. We use the economic activity as the threshold variable, as it divides economic development in two regimes under which we expect the effects of oil price shocks to differ. First, We find that the effects of oil price shocks on oil exporting economies greatly depend on the underlying cause of the shocks as well as the state of the economy. Second, we find little evidence of asymmetric response of output to the sign of oil price shocks. Our main findings warn decision makers in the area of macroeconomic planning that, when making decisions based on the oil price, the underlying causes of its variations as well as the state of the economy in which the oil price shocks occur have to be considered.

Oil price change and Economy relationship :A global review using a nonlinear dynamic model for MENA Countries

This paper studies the macroeconomic effects of oil price shocks in a selection of MENA countries. The oil price shock is identified by assuming that an individual country's performance does not affect world oil prices. We put particular emphasis on the time-varying relationship between oil prices and macroeconomic variables and implement their approach in a Time-Varying Structural VAR model (TV-SVAR) framework.
 The main findings are that the macroeconomic effects of oil price shocks have evolved over time in MENA countries. Interestingly, however, we do not find a lot of heterogeneity among the MENA countries they consider, even though their list includes both net oil exporters (Algeria, Bahrain, Iran, Kuwait, Saudia Arabia) and net oil importers (Turkey and Tunisia)

Oil Price and Exchange Rate Behaviour of the BRICS

ABSTRACT We attempt to predict the exchange rate returns of the BRICS (Brazil, Russia, India, China, and South Africa) countries with the global oil price using monthly datasets covering the period of 1973 to 2020. We formulate a predictive model that accounts for the salient features of the predictor and the predicted series in line with the recent literature. We establish that oil price is a good predictor of exchange rate returns for both net oil exporters (Brazil and Russia) and net oil-importers (South Africa and China). The consideration of asymmetries improves the predictability of an oil-based model for exchange rate movements and ignoring the same may lead to wrong conclusions. Finally, all the variants of the oil-based model outperform the benchmark model albeit with higher out-of-sample forecast gains with a nonlinear (asymmetric) model.

Oil shocks and financial systemic stress: International evidence

Abstract By conducting a structural VAR analysis on the financial systemic stress in 20 countries, this paper provides international evidence that oil structural shocks impact not only stress in individual financial markets but also their connectedness. The oil structural shocks explain a large fraction of the variation in the connectedness among various financial markets. The effect of oil structural shocks on financial systemic stress is largely dependent on the origins of oil price changes and a country's net oil export position. In most oil importing economies, financial systemic stress is negatively impacted by supply and aggregate demand shocks and positively impacted by oil-market specific demand shocks. Opposite patterns are detected in oil exporting economies. The effects of the spillovers are asymmetrically related with market conditions: During normal periods, more risks are spilled over from the oil market to financial systems, but during financial crises, the opposite occurs. In periods of financial crises and oil price collapses, there is noticeable contagion between the oil market and financial systems.

Inflation targeting & implications of oil shocks for inflation expectations in oil-importing and exporting economies: Evidence from three Nordic Kingdoms

In the context of the debate on inflation targeting, this paper analyses the impact of the oil shocks on inflation expectations in three Nordic Kingdoms. A NARDL framework is applied to data from Jan 1994 to June 2018 on the Kingdoms of Norway, Sweden and Denmark. Our key findings suggest that there are considerable nonlinearities and asymmetries in the relationship between inflation expectations, oil shocks and economic determinants of inflation expectations. The expectations formulated in the past have a very significant negative impact on future inflation expectations (adaptive expectations) and there is heterogeneity in the adaptiveness pace. A country's net oil trade position seems to reflect on the impact of oil price shocks on the inflation expectations and there is asymmetry and downwards inflation expectations rigidity. There is strong evidence of exchange rate pass-through to inflation expectations. Prevailing regimes of price stability can support to anchor future inflation expectations. Reduction in fiscal deficit and increases in money supply has a positive impact while unemployment has a negative impact on inflation expectations. The cumulative multiplier analysis showed that the impact of oil shock was symmetric in Sweden and Denmark but asymmetric in Norway which is a large net oil exporter. Besides the adoption of explicit inflation targeting regime by Sweden and Norway, the inflation expectations in the underlying economies are prone to the oil price shocks and macroeconomic determinants. These shocks pose a whole set of challenges to monetary authorities in these economies and the findings in the subject treatise provide some guidance on how each shock may transmit.

Research on the Time-Varying Impact of Economic Policy Uncertainty on Crude Oil Price Fluctuation

Due to multiple properties, the international crude oil price is influenced by various and complex interrelated factors from different determinants in different periods. However, the previous studies on crude oil price fluctuation with economic policy uncertainty (EPU) haven’t taken a wider range of volatility sources into their analysis frameworks. In this paper, the time-varying parameter factor-augmented vector autoregressive (TVP-FAVAR) model is introduced in order to avoid important information loss, as well as capture the time-varying impact on crude oil price fluctuation by EPU. Furthermore, the differences on crude oil fluctuations from net-oil exporting and net-oil importing country’s EPU are also elaborated. Here are three findings as follows. First, the impacts of global EPU on the crude oil price volatility show time-varying characteristics both in time duration and time-points. Second, the instantaneous impacts of global EPU on the price volatility of crude oil are directly relevant to major events, and the impacts are different in event types as well. Third, the time-varying characteristics depicting the impacts of EPU in countries who are net-oil exporter and net-oil importer on price volatility of crude oil show heterogeneity in fluctuation range, fluctuation intensity, and stage.

Oil price shocks, real economic activity and uncertainty

AbstractThis paper develops a structural factor vector autoregressive (SFVAR) model to study the effect of oil price shock on economic activity. The model allows both types of uncertainty (real economic activity and oil price) to directly affect oil prices and economic activity. More importantly, the factor variable, which is akin to the macroeconomic uncertainty measure of Henzel and Rengel (2017), captures the significant indirect spillover effects of both supply‐related (oil prices) and demand‐related (business cycle) shocks on oil prices and economic activity. By incorporating the indirect effect of this macroeconomic uncertainty, the response of economic activity to oil price shocks is amplified. In some countries the real effect is prolonged. Results for net oil exporting (importing) countries show that an oil price hike has an appreciably positive (negative) effect on economic activity. The factor dynamics of all countries, except for France, are highly correlated with each other, while they are all moderately correlated with some commonly used measures of macroeconomic uncertainty.

Determinants of Oil Footprints Embodied in Sino-US Trade: A Perspective from the Globalizing World

Oil plays an important role in global resource allocation. With the continuous development of the global supply chain, trade has brought a great impact on oil consumption. However, few studies have been focused on the oil consumption embodied in trade, that is, the oil footprints. Therefore, based on the multi-regional input-output model and structural decomposition model, this paper investigates the evolution and driving factors of the oil footprint between the two countries with the largest oil consumption in the world (China and the United States). By measuring the flow of oil footprint in bilateral trade, their trade transactions are analyzed at the national and industry levels. The results show that in Sino-US trade, China is a net exporter of virtual oil and the trade surplus is huge. The United States is the main destination of China’s virtual oil consumption exports. In 2004, China’s embodied oil net exports flowing into the US even exceeded its total net exports. Low value-added, high-consumption manufacturing is the main channel for China’s virtual oil to flow to the United States, which reflects that China is still at the bottom of the value chain. The most important factor in promoting exports’ growth is the scale effect of demand, followed by the input structure effect of intermediate products. The technical effect is an important force to curb the growth of oil footprints. This requires China and the United States to accelerate technological progress and reduce energy consumption intensity. At the same time, China should continue to optimize its trade structure, encourage the export of high-value-added products, and strive to climb the global value chain.

EVOLUTION OF USA TIGHT OIL FIELDS DEVELOPMENT TECHNOLOGIES

The dynamics of oil production in the United States of America (USA) for the one hundred-year period is presented, it is shown that the peak of production falls on may 2019 - 12.4 million bar/day. Currently, the USA, previously significantly dependent on imports, has become a net exporter of oil and gas and plans to further increase production of hydrocarbons due to the intensive development of hard-to-recover reserves. At the time of 2018, hard-to-recover reserves oil production in the USA (tight and shale formations) was already approaching 2/3 of total USA oil production and amounted to 61 % (6.5 million bar/day) of the total USA oil production (10.6 million bar/day). The main contribution to the production of hard-to-recover reserves oil in the United States bring Bakken formations, Eagle Ford and Permian Basin, with the development of which the «shale revolution» began. At the moment, the production of hard-to-recover reserves reservoir formations in the USA is about 6 % and 10 % of world oil and gas production, respectively. Due to the presence of such reservoirs in Russia, there is a need for their study, generalization and analysis of technological experience, taking into account the geological features of the US hard-to-recover reserves deposits. The geological prerequisites for the development technologies of hard-torecover reserves, the dynamics of technological efficiency of hydraulic fracturing operations (frac) are considered. It is shown that the large-scale introduction of fracturing operations and multistage fracturing had a significant impact on the efficiency of oil fields with hard-to-recover reserves, characterizing by the presence of low and ultra-low permeable reservoirs. Thus, the number of stages of hydraulic fracturing in the 1950s - early 1990s was about 10 - 30 thousand stages/year, while the last peak levels are close to the value of 500 thousand stages/year. The technological development of pumping systems, together with the development of well completion technologies, led to an increase in the number of fracture stages per well by about 20 times, the mass of the injected proppant - by about 40 times. As a result, the design of well completion and hydraulic fracturing redirects on a more dense arrangement of wells with tighter frac port placement. In addition, new generation hydraulic fracturing fluids are currently used to increase the utilization rate of produced water along the way, and a cheaper proppant of lower quality is used. The dynamics of the wells drilling activity in the fields of hard-to-recover reserves in the United States is presented, and marked that throughout the history of innovative development of technologies of development of hard-to-recover reserves most of the world's drilling activities occurred in the United States, about 10 % - in Canada and only 3 % - in the OPEC countries. During the «shale revolution» most of the wells drilled in the US were completed with hydraulic fracturing, and now the share of new oil wells completed with hydraulic fracturing reaches 80 %, and gas 90 %. The main aspects of the development of hydraulic fracturing operations technologies are presented. The role of improving the quality of proppants used in the implementation of hydraulic fracturing operations, development of well completion systems with hydraulic fracturing, well drilling technologies are presented.

ASSESSING THE ENERGY SUBSIDY REFORM IN INDONESIA THROUGH DIFFERENT SCENARIOS

This paper provides a comprehensive study on energy subsidy reform simulations in Indonesia by employing two new approaches, namely, the Almost-Ideal Demand System Iterated Linear Least-Square and SUBSIM. Periods of low and high oil prices are also accounted in this paper; further, it reveals that in 1999, when oil prices were low, this reform was possible due to Indonesia’s status as a net oil exporter and precise selected-reformed energy goods; however, the major concerns were the unsupporting welfare situations and the depreciation of the rupiah after the Asian Financial Crisis in 1997. In 2012, the evidence shows that despite high oil prices and Indonesia being a net oil importer, this reform saved more for the government and made significant welfare impacts. Overall, this paper suggests that this reform is feasible when at least some factors, i.e., stable national exchange rate, conducive welfare situations, availability of potential recipients’ database, and functioning government, are well-established. Keywords : Almost-Ideal Demand System; Energy goods; Simulation; Subsidy reform; Indonesia. JEL Classifications: D12, H53, I38, Q48 DOI: https://doi.org/10.32479/ijeep.9223

Trump’s “America first” energy policy, contingency and the reconfiguration of the global energy order

The global energy system is in transition to a new energy order characterized by the emergence of the United States as a net oil exporter, the shale revolution and the gradual shift towards low-carbon sources and renewables. The shale boom in the US was a game changer, as was the election of Donald Trump as US president. Trump pushed an ambitious “America first” agenda aimed at transforming the US into a global energy superpower. The purpose of this article is two-fold: first, it outlines the key pillars of the emerging global energy order. Second, it underscores the role of contingent events, a factor neglected by some previous studies because of their reliance on what A.O.Hirschman (1970) termed “paradigmatic thinking”. The recent transition in the international energy order is an outcome of two paramount, yet largely unanticipated events: the shale revolution in the US and Trump’s neomercantilist and unilateralist economic policies. While contingencies are an inherent feature of social reality, the scenario approach can be a useful heuristic for dealing with uncertainties. The article concludes by discussing the implications of these developments for global energy governance.

Oil resources, deficit financing and per capita GDP growth in selected oil-rich African nations: A dynamic heterogeneous panel approach

This study examines the effect of oil resource abundance and deficit finance on per capita GDP growth in selected oil-rich African countries between 1980 and 2017. We analyse panel data from Algeria, Angola, Egypt, Libya, and Nigeria using the dynamic heterogeneous panel approach. Results show that oil production positively enhances GDP growth in the panel, Algeria, Angola, Egypt, and Libya, except in Nigeria. Oil rents adversely affect growth in Algeria, Angola, Egypt, and Libya, while net oil export negatively affects GDP growth in the short- and long-run in Africa, Angola, Egypt, Libya, and Algeria, but positive in Nigeria. Lastly, deficit finance is growth-enhancing in Algeria and Egypt, but growth-reducing in Libya, Nigeria, and Angola. It is therefore essential for these countries to invest their oil largesse in boosting the productive base of their economies to lower fiscal deficits during periods of crude oil price uncertainties and boost GDP growth.

Dynamic structural impacts of oil shocks on exchange rates: lessons to learn

This study explores the dynamic effects of different oil shocks on real exchange rates in net oil importers and exporters. Specifically, the connectedness measures are combined with the structural vector autoregressive model. The findings show that oil supply shocks have a larger depreciating influence on exchange rates in oil exporters than in importers. All countries are generally more sensitive to oil-specific demand shocks, and this sensitivity can lead to a significant appreciation in real exchange rates, except in Japan and the United Kingdom. Further, the spillover effect between oil shocks and exchange rates has strengthened after the global financial crisis of 2007–08. Our findings provide useful implications for the policy-makers and market risk managers to effectively avoid exchange rate risk induced by oil shocks.

Analysis of Oil Price Effect on Economic Growth of ASEAN Net Oil Exporters

In this paper, the linear and nonlinear effects of oil price on growth for Association of Southeast Asian Nations (ASEAN)—3 net oil-exporting countries, namely Brunei, Malaysia and Vietnam, are investigated. The empirical analysis applies the augmented autoregressive distributed lag model (ARDL) bound test approach and the nonlinear autoregressive distributed lag model (NARDL) methodology over the period of 1979 to 2017. Evidence suggests that ignoring nonlinearities may lead to misleading results. Specifically, results reveal that the effect of oil price is asymmetric for the case of Brunei, while the effect oil price is deemed insignificant for the case of Malaysia and Vietnam, both linear and nonlinear model. Brunei’s high dependency on oil revenue makes it susceptible to negative oil price shock. This suggests that oil price still plays a significant role as the main driver of economic progress for Brunei.

Oil Prices and Stock Markets: An Empirical Analysis From Russia, Canada, USA and Japan

Purpose – The aim of this study is to examine the relationship between oil prices and stock markets at the aggregate and sector level in countries which have different characteristics. Design/methodology/approach – The relationship among stock markets, sectoral stock indices and oil price changes are examined for Russia and Canada which are net oil exporters and United States and Japan which are net oil importers by using Johansen cointegration test. Findings – The findings of this study show that there are significant and mostly positive relationships between Russian MOEX stock market indices and crude oil prices. However; significant Johansen cointegration between Brent Crude Oil prices and most of the Canadian, U.S. and Japanese stock market aggregate and sectoral indices are not reported. Discussion – According to the findings, it can be stated that the long term relationship between stock market indices and crude oil prices is related to the changing conditions in the profitability of the corporations, inflation and monetary policy as a reaction to moving oil prices.

Argentina set to increase gas and oil production

This study explores the relationship between energy and food nutrition prices through food calorie, fat, protein, and crude oil price links in the case of eight net oil importing (U.S., Korea, China, and Japan) and exporting (Canada, Saudi Arabia, United Arab Emirate, and Iran) countries. For this purpose, we use a Panel-VAR model with data for the 1974–2018 period. The results show that the effects of oil prices shocks on food nutrition prices are different in the two groups of countries. These effects, in oil importing countries, are initially declining and then adjusts over several periods while they are incremental and meaningful for oil exporting countries. In addition, the effects of real gross domestic product (GDP) and exchange rates on food nutrition prices are statistically significant in the oil exporting countries, while they have no direct effect on the food calorie and fat prices in the net oil importing countries. These results suggest that crude oil price, income, and exchange rate policies play an effective role in controlling hunger levels and improving food security in oil-exporting countries.

How China Could Become a Net Exporter of Oil & Gas: Lessons Learned from International Tight Oil Development

Even with very aggressive growth assumptions for renewables, the role for oil and gas will grow, both in absolute terms and as a share of China’s total energy mix. And yet China’s domestic production of oil and gas continues to fall short and China’s need for expensive, foreign imports will only get worse. Meanwhile, the United States – once the world’s largest importer of oil – has become the world’s largest oil producer, with only one-half as many drilling rigs as China. The implications for China are profound. China has an enormous resource base – if China could apply the lessons learned from international development of tight oil and gas, and replicate the US success, it would reap tremendous benefits in terms of energy security, international trade, energy costs, and domestic industrial and economic development.

What is new? The role of asymmetry and breaks in oil price–output growth volatility nexus

AbstractThis study examines the role of asymmetry and breaks in oil price–output growth volatility nexus. A representative of 10 countries was selected from net oil‐exporting and‐importing economies for the period 1986–2017. It is hypothesised that countries respond differently to changes in oil price. To prove this point, we use the recent nonlinear ARDL of Shin et al. (), based on the framework of the dynamic common correlated effect of the heterogeneous panel of Chudik and Pesaran (), to decompose oil price into positive and negative partial sums. Our results show that without accounting for breaks, asymmetry only matters for net oil exporters in both short‐ and long run. However, accounting for breaks expanded the importance of asymmetry to net oil importers (in the short run). These results are robust to changes in the measures of oil price and growth volatility.

Does international oil volatility have directional predictability for stock returns? Evidence from BRICS countries based on cross-quantilogram analysis

While numerous studies have investigated the relationship between oil volatility and stock returns, it is surprising that little research has examined the quantile dependence and directional predictability from oil volatility to stock returns in BRICS (Brazil, Russia, India, China, and South Africa) countries. We address this issue by using the cross-quantilogram model proposed by Han et al. (2016). The empirical results show that, overall, oil volatility has a directional predictability for the stock returns in BRICS countries. When the oil volatility is in a low quantile (lower than its 0.1 quantiles), it is less likely to show either a large loss or a large gain in the stock market. In contrast, there is an increased likelihood of either large loss or a large gain in the stock market when the oil volatility is in a high quantile (higher than its 0.9 quantiles). The directional predictability from the oil volatility to stock returns depends on the net position of oil imports and exports of these BRICS countries in the oil market. The net oil exporters (Russia and Brazil) are less likely to have large gains and large losses in the stock market than are the net oil importers (India, China, and South Africa) when the oil volatility is in a low quantile. The net oil exporters are more likely to have large gains and large losses than are the net oil importers when the oil volatility is in a high quantile. The results are robust to change in the variable of oil volatility and the sample interval.