Oil-importing Countries Research Articles

Will a Geopolitical Conflict Accelerate Energy Transition in Oil-Importing Countries? A Case Study of the Philippines from a Real Options Perspective

Geopolitical conflicts, involving a major player in the world market, affect the prices of oil and commodities, particularly in oil-importing countries. Consequently, the unprecedented changes in oil prices impact investments in energy transition projects. This study aims to analyze the dynamics of investment decisions in energy transition under uncertainties in geopolitical risks. This research applies the Black-Scholes-based real options valuation to value the flexibility in postponing energy transition investments considering the repercussions of the Russia-Ukraine war. Applying the proposed model to the case of the Philippines, the valuation result with a net present value of USD 231 million for a 1 GW capacity shows that energy transition is a viable project when the cost savings from using fossil fuels to renewables are considered. On the other hand, real options valuation finds a higher flexibility value of USD 990 million, which implies a better decision to postpone the project. The uncertainty in geopolitical conflicts further increases this value causing a longer waiting period to implement the energy transition project. Sensitivity analysis shows that the results are robust to changes in the explanatory variables. Results provide policy implications on making an oil-importing country energy self-sufficient and robust from economic and geopolitical shocks.

Heterogeneity dependence between oil prices and exchange rate: Evidence from a parametric test of Granger causality in quantiles

This paper re-examines the nexus between crude oil price and exchange rate by investigating their heterogeneity dependence structure within the framework of Granger causality in quantiles for a sample of developed and emerging economies (namely UK, Canada, Brazil, Russia, Mexico, Norway, India, Japan, South Africa, South Korea and European Union (EU)). The results indicate no distinct causality between the crude oil price changes and the real exchange rate returns for all countries besides Russia at the median of the conditional distribution. Besides, the crude oil price changes influence the exchange rate returns in all countries, except Norway and EU, particularly around the tails of the conditional distributions of exchange rate returns. This suggests that the oil price changes influence the real exchange rate returns when the real exchange rate returns are either in extreme appreciation or depreciation. Moreover, the crude oil price movement can be explained by the exchange rate returns for most oil importers only when the crude oil market is bearish or bullish. By contrast, the real exchange rate can permanently affect the crude oil price for most oil-importing countries irrespective of the crude oil market's state. Finally, our findings provide an essential reference for managing the extreme risk dependence between the exchange rate market and the crude oil market.

Nexus of energy and food nutrition prices in oil importing and exporting countries: A panel VAR model

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.

The relationship among oil prices volatility, inflation rate, and sustainable economic growth: Evidence from top oil importer and exporter countries

This study examines the relationship among oil price volatility, inflation rate, and economic growth among oil importers and exporters countries. Oil prices play a significant role in the energy markets and boost the economic growth of the overall economy. This study uses various diverse panel data assessors, including fixed impacts, bias-corrected least squares dummy factors (LSDVC), generalized methods of moments (GMM), feasible generalized least squares (FGLS), and random coefficients (RC) to investigate nexus among oil price volatility, inflation rate and economic growth in top importers and exporters countries. This study examines thirty years from 1990 to 2019. The primary findings indicate that oil price volatility has a negative and measurable huge effect on the financial development and economic growth of oil importer and exporter countries. Moreover, oil exporter countries are affected by oil cost vulnerability, notably such as, Norway and Canada.

OIL PRICES, ECONOMIC POLICY UNCERTAINTY AND STOCK MARKET RETURNS IN OIL IMPORTING COUNTRIES: THE IMPACT OF COVID-19 PANDEMIC

This study examines the nexus between oil prices, economic policy uncertainty and stock markets in a panel of selected major oil importing countries between June 2014 and October 2020. We analyzed China, India, Germany, Italy and Japan in the study because these countries are among the largest oil importer countries in the economic policy uncertainty index developed by Economics Policy Uncertainty Platform. We split the period into three sub-periods as June 2014- February 2016, March 2016-December 2019 and January - October 2020 and employed several econometric models to analyze the relation between the variables in different economic conditions and to identify how COVID-19 pandemic has influenced the effect of oil prices and economic policy uncertainty on the stock markets. Empirical results show that the pandemic changed the dynamics of the relations between the variables and especially the effect of oil prices on the stock markets has grown stronger for the oil importing countries.

Effects of Conditional Oil Volatility on Exchange Rate and Stock Markets Returns

The underlying volatility at a given time is called conditional volatility at this particular time and is modeled by various ARMA-GARCH conditional variance equations (GARCH, EGARCH, GJR, APARCH, IGARCH). How important are oil price fluctuations and oil price volatility in foreign exchange markets and stock markets? What is the nature of the relationship between these three markets? What are the political implications if volatility, using appropriate models to determine, turns out to be important? We evaluate these questions empirically, using the specification of Narayan and Narayan (2010). This specification, in our paper, deals with the determination of volatility appropriate models, based on information criteria, of the ARMA-ARCH family conditional volatility of oil returns using daily data for each country independently (i), and revolve around an analysis of the effect of the volatility of black gold price on the returns of the other two markets in Oil Importing Developed Countries category (ii). The selection of appropriate models of oil returns according to the period of the chosen data gives the ARMA(2,2)- GJR(1,2) model for the Germany and the ARMA(2,2)-GJR(2,2) model for the Japan and the USA. The results that the conditional variances of oil returns, foreign exchange market returns and stock market returns are contested and they have a long-term relationship in different countries. In addition, the results of the granger causality tests and the study of impulse response functions have shown that it has a sending effect of the volatility of oil prices on most foreign exchange markets and stock markets, highlighting the strong explanatory power of market volatility, but bidirectional causality is not always present. Our empirical results involved in the prevention of shocks are important for policymakers, for portfolio managers seeking optimal portfolio allocation, for monetary authorities who are studying changes in the exchange rate of the national currency against currencies, for oil-importing countries seeking to minimize their spending on crude oil, and for oil-exporting countries seeking the sound management of oil reserves. They also show that the volatility of crude oil prices on the world market is generally more significant for foreign exchange and stock markets than the volatility of oil price in the local market. This main conclusion gives political implications to policymakers.

Renewable and non-renewable energy consumption – Ecological footprint nexus in net-oil exporting and net-oil importing countries: Policy implications for a sustainable environment

Despite the numerous studies on the role of energy consumption in environmental degradation, there is scarcity of comparative empirical information on the net oil-importing and net oil-exporting countries. Using the Augmented Mean Group (AMG) that is robust to cross-sectional dependence, non-stationarity, heterogeneity and structural breaks to comparatively assess the impact of non-renewable and renewable energy consumption on ecological footprint, we find that non-renewable energy consumption in both country groups significantly contributes to environmental degradation. However, the impact is greater for the net oil-exporting countries due to their high level of dependence on crude oil, poor development and consumption of renewable energy, and energy inefficiency. On the other hand, renewable energy consumption is found to be significant only for the net oil-importing countries. The coefficient is expectedly negative, suggesting a reduction in environmental degradation. Its insignificance in the net oil-exporting countries also lends credence to its poor development and consumption due to the huge reliance on oil.

Oil price shocks and yield curve dynamics in emerging markets

In a local projections framework, we study the impact of oil price shocks, based on a refined approach to disentangle oil price movements, on the dynamics of the entire yield curve in nineteen emerging economies with different positions on the oil market. Responses of the term structure factors to oil market shocks are shown to differ conditional on not only the underlying sources that drive oil price, but also based on the oil-dependence of these economies. In particular, we find that oil price risk shocks put upward pressure on the level, slope, and curvature of interest rates across the board. Supply-driven shocks in oil markets cause a rise in the level of interest rates in oil-importing economies more significantly, yet the downward impact on yield curve slope is more pronounced in oil-exporting countries. Demand-driven shocks have a significant and persistent upward impact on level factors in oil-importing countries. Furthermore, the effect of precautionary demand shocks on the curvature factor is more pronounced in oil-importing countries vis-à-vis oil-exporters. Significance, direction, and duration of our results may guide monetary policymakers in emerging countries as well as international investors in portfolio and hedging decisions.

Connectedness of energy markets around the world during the COVID-19 pandemic

This paper studies the connectedness among energy equity indices of oil-exporting and oil-importing countries around the world. For each country, we construct time-varying measures of how much shocks this country transmits to other countries and how much shocks this country receives from other countries. We analyze the network of countries and find that, on average, oil-exporting countries are mainly transmitting shocks, and oil-importing countries are mainly receiving shocks. Furthermore, we use panel data regressions to evaluate whether the connectedness among countries is influenced by economic sentiment, uncertainty, and the global COVID-19 pandemic. We find that the connectedness among countries increases significantly in periods of uncertainty, low economic sentiment, and COVID-19 problems. This implies that diversification benefits across countries are severely reduced exactly during crises, that is, during the times when diversification benefits are most important.

Heterogeneous effects of oil structure and oil shocks on stock prices in different regimes: Evidence from oil-exporting and oil-importing countries

This paper examines whether or not the oil structure of economies, the source of oil shocks, and regime changes affect stock price responses. After dividing the entire period into two regimes (bull and bear market) and considering three different oil shocks: global oil price, global oil demand, and global oil supply, we attempted to select countries that are considered developed economies while demonstrating differences and similarities in their oil structures. To this end, we compare the effects of oil shocks on the stock prices of Norway and Canada, two oil-exporting countries, to China and Japan, two oil-importing countries, using the Threshold Structural Vector Autoregression (TSVAR) analysis for the period 1990:1–2020:4. The results indicate that the structure of the oil and the source of the oil shocks have a significant effect on the responses. In this regard, the responses of oil-exporting countries are strikingly similar to one another and dissimilar to those of the two oil-importing countries. All of the oil shocks considered thus far have had a short-term effect but have been neutral in the medium and long term (except for oil demand shocks in the bull market). Additionally, the stock market's responses to oil shocks have been regime-dependent, with most responses being more sharply in a bear market than in a bull market. According to the findings, there is a strong link between the stock market, the source and type of oil shocks (positive or negative), economics' oil structures, and regime changes, which may influence policymakers' response to various oil shocks in different stock market conditions.

H2-rich syngas production from air gasification of date palm waste: an experimental and modeling investigation

The energy generation from renewable sources is in prime focus not only oil-importing countries as well as oil-exporting countries. This study aims to probe the energy generation (syngas) from Saudi Arabian date palm fronds through air gasification in a downdraft fixed-bed system. In addition, an equilibrium process simulation model was developed using Aspen Plus, and predicted results were compared with experimental results. Furthermore, the mass and energy flows of the system were also analyzed. In parametric study, the impact of temperature (600–900 °C), particle size (2–6 mm), and air flowrate (1–4 l/min) were investigated on syngas composition and gasification performance parameters higher heating value, gas yield, carbon conversion efficiency, and cold gas efficiency. The results indicate that H2 concentration was enhanced with the rise of temperature and particle size from 12.12 to 26 vol.% and 26.02 to 26.89 vol.% respectively. The enrichment of H2 concentration was due to the activation of endothermic reaction and methane-reforming reaction as CH4 was dropped up to 12.6 vol% with increased temperature. The higher heating value of syngas, carbon conversion efficiency, and cold gas efficiency have shown an increasing profile with increased temperature and air flowrate. The gas concentration profile obtained from the simulation model found good agreement with the experimental results. The energy analysis shows that the process is highly energy consuming, and most of the energy waste is in the form of condensate that could be potentially utilized. This study will be helpful for researchers and commercial enterprises to produce syngas from Saudi Arabian date palm fronds.

Oil price changes and stock returns: Fresh evidence from oil exporting and oil importing countries

Oil price changes and stock returns: Fresh evidence from oil exporting and oil importing countries

Dynamic causality interplay from COVID-19 pandemic to oil price, stock market, and economic policy uncertainty: evidence from oil-importing and oil-exporting countries.

In this study we examine the time-varying causal effect of the novel COVID-19 pandemic in the major oil-importing and oil-exporting countries on the oil price changes, stock market volatilities and the economic uncertainty using the wavelet coherence and network analysis. During the period of the pandemic, we explore such relationship by resorting to the wavelet coherence and gaussian graphical model (GGM) frameworks. Wavelet analysis enables us to measure the dynamics of the causal effect of the novel covid-19 pandemic in the time–frequency space. Regarding the findings displayed herein, we first found that the COVID-19 pandemic has a severe influence on oil prices, stock market indices, and the economic uncertainty. Second the intensity of the causality effect is stronger in the longer horizon than in the short ones, suggesting that the causality exercise continues. Our findings also provide evidence that the COVID-19 pandemic and oil price changes in oil-importing countries mirror those in oil-exporting countries and vice versa. Further, the COVID-19 pandemic has a profound immediate time–frequency effect on the US, Japanese, South Korean, Indian, and Canadian economic uncertainties. A better understanding of oil and stock market prices in the oil-importing and oil-exporting countries is vital for investors and policymakers, specially since the novel unprecedented COVID-19 crisis has been recognized among the most serious ever happened. Thus, the findings suggest that the authorities should strongly take efficient actions to minimize risk.

Do Oil Price Shocks Affect Exchange Rates in Oil-importing Countries: A Case of the Zambian Economy using the SVAR Approach

Oil price shocks have been argued to impact Real Effective Exchange Rates (REERs) in net oil importing countries, mostly through the wealth-transfer effect, which involves the transfer of wealth from net oil-importers to net oil-exporters, and the Terms of Trade Channel. Since this analysis had not been done for the Zambian case by decomposing oil price shocks, a Structural Vector Autoregressive Model (SVAR) was used to measure the contemporaneous impact of oil price shocks on REERs, and was complemented by Impulse Response Functions (IRFs), Granger Causality Tests and Forecast Error Variance Decomposition (FEVD). The long-run impact was analyzed by the Vector Error Correction Model (VECM) after satisfaction of cointegration requirements. The findings revealed that decomposed oil price shocks had no short-run contemporaneous impact on REERs at the 5% level. Similarly, it was found that decomposed oil price shocks and the combined effect of all the variables in the system did not granger-cause Zambia’s REERs, while FEVD results showed that oil price shocks were attributed for a minute proportion of the variation in REERs. These findings were attributed to Zambia’s profile as a predominantly copper and cobalt exporter, historic exchange rate controls, fuel subsidies, and price controls. Johansen’s cointegration test revealed the existence of at least one cointegrated equation in the system, so the subsequent VECM which was constructed revealed that decomposed oil price shocks had no long-run impact on REERs in Zambia, but that the Error Correction Term (ECT) which measures the speed to adjustment back to equilibrium after a short-run disturbance, was significant.

A Comparative Analysis of Energy Subsidy in the MENA Region

This paper focuses on analyzing energy prices subsidies distribution in the MENA region among its seven components, according to the products that benefit from subsidized prices, and by per capita. As a nominal average of the years 2013, 2015, and 2017, both Iran and KSA had the higher nominal pre-tax subsidy averages estimated to $52.11 and $45.54 billion respectively, and also had higher post-tax subsidy averages estimated to $118.55 and $114.81 respectively. Global warming and local air pollution were the most important components after the pre-tax subsidies component in all MENA region countries. The “Congestion” component came after the level of the two environmental components averages in oil-exporting countries, while the “accidents” component in almost all the oil-importing countries came after the level of the two environmental components averages. By products, petroleum products were the main products that benefited from energy prices subsidies in almost all MENA countries. The reform process must take into account the specifics of each country with regard to the details of energy subsidies at its level, as energy subsidies vary from one country to another, whether in terms of its value, the weight of its components, and the subsidy share of each energy products.

THE DYNAMIC CAUSAL RELATIONSHIP BETWEEN OIL PRICE AND ECONOMIC GROWTH IN OIL-IMPORTING SSA COUNTRIES: A MULTIVARIATE MODEL

This study examines the causal relationship between oil price and economic growth in 14 oil-importing countries in sub-Saharan Africa during the period 1990 to 2018. The countries are further divided into two groups, namely seven low-income countries (LICs) and seven middle-income countries (MICs) in order to test whether the causality between oil price and economic growth depends on the countries’ income levels. Unlike previous studies that used a bivariate model, this study employs a multivariate Granger-causality model, which incorporates oil consumption and real exchange rate as intermittent variables in a bivariate setting between oil price and economic growth. The study employs panel cointegration and the panel Granger-causality tests to examine this linkage. The results of the study show that in the short run, there is a bidirectional causality between oil price and economic growth for the entire dataset, and both for the LICs and MICs. However, in the long run, there is a bidirectional causal relationship between oil price and economic growth for the entire dataset and MICs, but a unidirectional causality from economic growth to oil price for the LICs. Overall, the study found a feedback relationship between oil price and economic growth to be predominant.

On the Relationship between Oil and Exchange Rates of Oil-Exporting and Oil-Importing Countries: From the Great Recession Period to the COVID-19 Era

This paper is dedicated to studying and modeling the interdependence between the oil returns and exchange-rate movements of oil-exporting and oil-importing countries. Globally, twelve countries/regions are investigated, representing more than 60% and 67% of all oil exports and imports. The sample period encompasses economic and natural events like the Great Recession period (2007–2009) and the COVID-19 pandemic. We use the dynamic conditional correlation mixed-data sampling (DCC-MIDAS) model, with the aim of investigating the interdependencies expressed by the long-run correlation, which is a smoother (but always daily observed) version of the (daily) time-varying correlation. Focusing on the advent of the COVID-19 pandemic in 2020, the long-run correlations of the oil-exporting countries (Saudia Arabia, Russia, Iraq, Canada, United States, United Arab Emirates, and Nigeria) and (lagged) WTI crude oil returns strongly increase. For a subset of these countries (that is, Saudia Arabia, Iraq, United States, United Arab Emirates, and Nigeria), the (lagged) correlations turn out to be positive, while for Canada and Russia they remain negative as before the advent of the pandemic. In addition, the oil-importing countries and regions under investigation (Europe, China, India, Japan, and South Korea) experience a similar pattern: before the COVID-19 pandemic, the (lagged) correlations were negative for China, India, and South Korea. After the COVID-19 pandemic, the correlations of these latter countries increased.

Do crude oil prices and the sentiment index influence foreign exchange rates differently in oil-importing and oil-exporting countries? A dynamic connectedness analysis

With growing interest in the spillover effects of returns and volatility in the cross-market between the crude oil market and the foreign exchange market, alongside the rapid development in the social network, we are also intrigued by determining the dynamic connectedness of these cross markets. We utilized the TVP-VAR approach to investigate the daily time-varying connectedness of the foreign exchange rates of the six leading oil-importing and oil-exporting countries. Furthermore, this study compares how the impacts of crude oil prices and the sentiment index vary between oil-exporting countries and oil-importing countries, particularly during the 2020 crude oil crash. A network topology analysis is used to visualize the network connectedness between crude oil markets, foreign exchange markets, and the news sentiment on the most volatile days in 2020. In terms of returns, results show that WTI had greater spillover effects on the exchange rates of oil-importing countries; in most cases, the sentiment index was more of a directional spillover receiver. The situation changed slightly during the COVID-19 pandemic. In terms of volatilities, the WTI spillover effect was generally transmitted to the foreign exchange rates from the countries that are more dependent on U.S. oil imports and have more co-movement with the price of crude oil; the sentiment can be similarly explained, and the situation during the COVID-19 pandemic is consistent with the results of volatilities.

Energy and Bank Equity Interactions

Oil price shocks harm real output and bank and industrial profit in most oil-importing countries, which has motivated us to investigate the impact of these shocks on the equity performance of banking industries. To fulfill the research objectives, we involve a sample of developed and emerging economies for comparison purposes. The objective of employing the Toda and Yamamoto (Journal of econometrics, 1995, 66 (1), 225–250) causality test is to explore the time-variant relationship between oil prices and banking indices to investigate how oil price shocks affect the performance of country-specific banking industries. In addition, an impulse response function and variance decomposition analysis are utilized to, respectively, examine the time-variant relationship between oil price shocks and macroeconomic factors and the performance of the banking sector. Results vary across different economies in our sample, but the magnitude of oil price impact is relatively significant in the US, the UK, Canada, Japan, Mexico, and Brazil. The findings indicate that oil price rises adversely affect equity bank indices in developed and emerging economics except for Mexico. Notably, our findings show that oil prices and interest rates jointly have significant power in explaining the banking equity variation and suggest that international bank portfolio investors should consider hedging oil price risk.

Partial environmental tax coordination and political delegation

In the framework of environmental tax competition, this study analyzes the political delegation of tax decisions in oil-producing and oil-importing countries. The main findings are as follows: (i) with uncoordinated tax competition, voters in oil-producing countries typically choose a policymaker who is less green than the median to drive oil prices in their favor, while voters in the oil-importing countries prefer green policymakers over the median; (ii) when oil-producing countries form an oil cartel to coordinate their policies, in anticipation of such coordination, voters elect green policymakers over the median not only in oil-importing countries but also in oil-producing countries; and (iii) policy coordination by oil-producing countries is more likely to be sustained when policy leaders in those countries are exogenous to citizens for reasons such as royal rule, but it is more likely suffer a breakdown when policy leaders are elected.