International Oil Market Research Articles

Operational Excellence, Regulatory Framework and Firm Characteristics in Oil Sector: the Role of Enterprise Risk Management Implementation

The evolving challenges of health, safety and the environment (HSE), refineries and high cost of production affects the operations of the Nigerian oil and gas sector. The situation could affect the sector's competitiveness in the international oil market. This article is aimed at determining the role of enterprise risk management (ERM) implementation on the relationship between operational excellence (OpEx), regulatory framework and firm characteristics. A quantitative survey method was employed, data were collected via questionnaires from seven subsidiary companies of the Nigeria National Petroleum Corporation (NNPC), and SPSS was used for the analysis. The findings indicated that regulatory framework and firm characteristics have significant positive effects on OpEx. Also, the ERM implementation significantly influences the relationship between the variables of the study. The paper concludes that the significant variance in OpEx could improve operational performance in the sector. It was recommended that regulations governing the oil sector be reviewed and harmonised.

Configuraciones de ciudades en la Amazonía brasileña: el caso de Coari en el Amazonas

This article presents theoretical approaches on the concepts of rural and urban in the Western Amazon. The methodology used is a literature review and a case study. The rural and the urban are relevant themes in the investigations of the Group of Studies and Research on Territorial and Urban Planning, of the Federal University of Pará, as well as the discussions of the Center of Studies and Research of the Cities in the Brazilian Amazon of the Federal University of Amazonas. We analyze the case of the city of Coari in Amazonas, which underwent socio-spatial transformations since the arrival of the oil industry, when the financial transfer to the City Hall, referring to the royalties resources, begins. It discusses the transformations that have occurred and, consequently, how the theoretical concepts of rural and urban cannot be applied in their entirety, considering that the region of the western Amazon has certain particularities such as: the relationship with the forest and with the rivers still remains alive in the daily life of the population of Coari and, at the same time, the city's economy is linked to the oscillations of the international oil market, maintaining a culture of sponsorship and political patronage.

The Value of Saving Oil in Saudi Arabia

Saudi Arabia has one of the highest levels of per capita oil consumption in the world, but attempts are now being made by Saudi policymakers to significantly reduce this. Thus, a relevant policy question is what is the value of saving a barrel of oil in Saudi Arabia? The instinctive answer is that the value saved is the difference between the international market price and the domestic price. However, for Saudi Arabia, this answer is insufficient for several reasons. First, the current administered domestic price of oil is set below international market levels, which leaves room for improved economic efficiency. Second, Saudi Arabia is not a marginal producer of oil but a critical player in the international oil market; a shift in Saudi exports affects international oil prices and consequently the country's revenue from oil exports. Third, there are different ways to reduce the domestic consumption of oil. This paper explores policies that reduce the domestic consumption of oil in Saudi Arabia, increasing the amount of oil that would ultimately be exported and assesses the impact on welfare and carbon emissions (however, given the long-run perspective adopted here, it does not address the optimal timing to export the oil that is saved). Among the various methodologies to do this, we opt for a general equilibrium model. Our results suggest that oil-saving policies would lead to positive welfare gains and a reduction in domestic carbon emissions. The most relevant insight for policymakers is that a barrel of oil saved in the Saudi economy leads to an increase in welfare ranging between $6 to $56 for an international oil price of $52.9 per barrel, depending on the policy, and a decrease in domestic CO2 emissions from 150 kg to 368 kg.

Time-Gap effects of crude oil prices on the foreign exchange rates

There is a pool of techniques and methods in addressing dynamics behaviors in higher frequency data, prominent among them is the ARCH/GARCH techniques. In this paper, the various types and assumptions of the ARCH/GARCH models were tried in examining the dynamism of exchange rate and international crude oil prices in Nigeria. And it was observed that the Nigerian foreign exchange rates behaviors did not conform with the assumptions of the ARCH/GARCH models, hence this paper adopted Lag Variables Autoregressive (LVAR) techniques originally developed by Agung and Heij multiplier to examine the dynamic response of the Nigerian foreign exchange rates to crude oil prices. The Heij coefficient was used to calculate the dynamic multipliers while the Engel & Granger two-step technique was used for cointegration analysis. The results revealed an insignificant dynamic long term response of exchange rate to crude oil prices within the periods under review. The coefficient of dynamism was insignificantly in most cases of the sub-periods. The paper equally revealed that the significance of the dynamic multipliers depends greatly on external information about both market indicators which are two-way interactions. Thus, the paper recommends periodic intervention in the foreign exchange market by the monetary authorities to stabilize the market against any shocks in the international crude oil market, since crude oil is the main source of foreign exchange in Nigeria.

Impacts of the review of the Brazilian local content policy on the attractiveness of oil and gas projects

Abstract The study assesses the relevance of the recent local content policy (LCP) reforms for the oil sector in Brazil on the attractiveness of investments in exploration and production (E&P), and in terms of employment and income generation. For this, a cash flow of a typical E&P project was simulated in the Brazilian pre-salt environment in a field with reserves of 5 billion barrels of oil equivalent, under the regime of production sharing, adopting the assumptions of government participation of the tender protocol of the Libra field. In addition, in order to estimate the impact of the LCP on the generation of employment and income, the methodology of the Input–Output Model (IOM) was applied. The results indicated that high commitments of local content (LC), in contexts of restricted oil prices, compromise the profitability of E&P projects. In addition, the results showed that a greater volume of investments can more than offset the impact of higher levels of LC in generating employment and income for the country. Finally, the article concludes by arguing that the LCP reforms, undertaken since 2016, were necessary to guarantee the competitiveness of the Brazilian upstream in the current context of the international oil market.

Spillover effect and Granger causality investigation between China’s stock market and international oil market: A dynamic multiscale approach

With the rapid development of China’s economy and the increasing dependence of crude oil on foreign countries, the relationship between China’s stock market and the international oil market is becoming closer and closer. Aiming to explore the interrelation of the two markets theoretically and empirically, the linear and nonlinear Granger causality tests combined with the bivariate empirical mode decomposition model are used to evaluate the dynamic multiscale interaction and the volatility effect between China’s stock market and the international oil market. With the Shanghai stock index and Brent Spot Price (FOB price) as empirical study samples, some interesting conclusions emerged. There is a bi-directional nonlinearity between the two markets, but the relationship between international crude oil price and China’s stock market shows a gradual strengthening trend. The Granger causality between China’s stock market and the international oil market is relatively diverse and is varying with different timescales. And when analyzing the inner factors either in the Brent oil market or the stock market, we need to consider the spillover effect between the two markets.

Forecasting Oil Price Volatility in the Era of Big Data: A Text Mining for VaR Approach

The rapid fluctuations in global crude oil prices are one of the important factors affecting both the sustainable development and the green transformation of the global economy. To accurately measure the risks of crude oil prices, in the context of big data, this study introduces the two-layer non-negative matrix factorization model, a kind of natural language processing, to extract the dynamic risk factors from online news and assign them as weighted factors to historical data. Finally, this study proposes a giant information history simulation (GIHS) method which is used to forecast the value-at-risk (VaR) of crude oil. In conclusion, this paper shows that considering the impact of dynamic risk factors from online news on the VaR can improve the accuracy of crude oil VaR measurement, providing an effective tool for analyzing crude oil price risks in oil market, providing risk management support for international oil market investors, and providing the country with a sense of risk analysis to achieve sustainable and green transformation.

Export Diversification and Economic Growth in Nigeria

The issue of export diversification has been contentious in Nigeria due to the country’s unstable growth pattern which is majorly associated with instability in the international oil market and the poor performance of other sectors of the economy. Therefore, this study examines the link between export diversification and economic growth in Nigeria from 1962 to 2016. The study utilizes the Auto-regressive Distributed Lag (ARDL) technique. The result of this study shows that export diversification has a positive but insignificant influence on economic growth in Nigeria. The above result implies that the oil sector still dominates the Nigerian economy while the diversification drive of the government has not been significant in other sectors of the economy. Thus, the study recommends the need for conscious economic policies that would promote the diversification of the entire non-oil sector of the economy. The study concludes that export diversification is an insignificant determinant of economic growth in Nigeria.

Da audácia ao pragmatismo

O artigo relaciona as particularidades do mercado internacional de petróleo com aspotencialidades e limitações da política externa projetada e exercida pela Venezuela ao longodo terceiro mandato presidencial cumprido por Hugo Chávez Frías (2007-2012). Busca-se,pois, apresentar e problematizar as especificidades do rentismo petroleiro venezuelano e, emespecial, suas implicações para sua política externa. A análise trata dos “efeitos pendulares”que os petrodólares causaram na inserção internacional do país caribenho: no primeiro biêniodo período estudado, a alta histórica da commodity possibilitou aos venezuelanos consolidarações inovadoras e ambiciosas de integração regional, as quais culminaram no aumento dapresença e do peso político do país, em especial na América Central e Caribe. Contudo, noperíodo subsequente, a pronunciada desvalorização do combustível causou o arrefecimentoda “diplomacia do petróleo” em favor de uma postura mais pragmática no que concerniu àsua comercialização. Nesse contexto, analisam-se os limites e possibilidades da aproximaçãosino-venezuelana, bem como a interdependência comercial estabelecida entre Venezuelae Estados Unidos da América. Conclui-se que, em que pese seu propósito disruptivo, asações de política externa empreendidas pelos bolivarianos estiveram condicionadas aos oraexpressivos, ora insuficientes, recursos obtidos com a venda de petróleo.

Modelling Crude Oil Prices Volatility in India

Crude oil is a crucial component of India’s energy basket after coal. The increasing demand for crude oil in India is met through imports. Crude oil price changes affect the social stability, economic development, and national security of the country. Therefore, it is crucial to devise suitable methods to forecast crude oil price movements accurately.Thus, the purpose of this study is to evaluate the forecasting performance of linear and non-linear time series models. In the study Box Jenkins methodology is used to obtain a best fit ARIMA and GARCH type models and further use it to forecast the crude oil (Brent) prices. The study shows that the crude oil price series is volatile over the time trend and therefore uses the GARCH class models as well which are capable of capturing volatility clustering typical of oil price series. Performance of ARIMA & GARCH class modes is then compared to find out which model better forecasts the crude oil prices. Indian economy being vulnerable to volatility in the international crude oil market requires a methodology to accurately forecast the price volatility and therefore to fill this gap this study for forecasting and studying the behavior of crude oil price series was conducted.

Dynamic transmission mechanisms in global crude oil prices: Estimation and implications

This study examines the dynamic behavior and spillover effects in global crude oil markets by introducing a connectedness measure based on the vector autoregressive model. Seven major crude oil prices are selected for the analysis on return and volatility connectedness and used to investigate information spillover and their dynamic linkages. Our empirical results suggest that the degree of market integration in global crude oil markets remains high over time although the total connectedness of the whole system varies substantially. In the international crude oil market, each price has shown to made distinctive contributions to the information flow of return and volatility networks. Specifically, the Brent and Bonny prices have played leading roles in explaining return dynamics over the whole sample, whereas the Dubai price has the highest hierarchy in the volatility transmission mechanism. In both the return and volatility networks, Asian oil prices are net receivers in the international oil market. Our findings shed light on global imbalance in the crude oil market pricing system, such as understanding the Asian Premium, and have important implications for forming portfolios to hedge oil market risks.

Energy contagion analysis: A new perspective with application to a small petroleum economy

We put forward the novel concept of energy contagion, i.e. a deepening of energy-finance linkages under crisis conditions in energy markets. Further, we show how to construct tests for energy contagion through correlation, co-skewness, and co-volatility channels. The samples of our contagion measures are defined in terms of calm and crisis periods in the international crude oil market. In particular, we compare how these various co-moments in the energy-finance nexus change during: (1) Oil booms and slumps using semi-parametric rule-based algorithms; (2) Tranquil and turbulent oil price volatility episodes using a non-hierarchical k-means clustering algorithm. Energy contagion analysis is essential for financial stability analysis in economies where prosperity is linked to the prices of hard commodities. Our applications are performed on the oil-exchange rate and oil-stock market relationships of the small petroleum economy of Trinidad and Tobago. The main results show a negative oil-real effective exchange rate dependency; a weak oil-stock returns association; and the existence of several energy contagion channels in both financial relationships, which are sensitive to the contemporary global financial crash.

Empirical analysis of the dynamic dependence between WTI oil and Chinese energy stocks

In this paper, we employ the dynamic copula approach to explore the dependence structure between WTI oil and Chinese energy stock index (300ENI). We first use the AIC (Akaike Information Criteria) together with the binary segmentation procedure to detect the change points of copula families and copula parameters, which extend the existing time-varying copula method. Then we can get the optimal copula between WTI oil and 300ENI for each time period, and analyze the dependence between them combining with the national and international economic environment. We find that the recession of both the international oil market and Chinese energy stock market causes the significant concordance and symmetric tail dependence. The asymmetric dependence turns out to be in Chinese economic recession and recovery time. Furthermore, we apply our results to analyze the effectiveness of hedging WTI oil using 300ENI. Results show that the hedging is more effective in China's sluggish time than in economic boom. Finally, our economic cycle analysis shows that different economic situation pairs of WTI oil and Chinese energy stocks exhibit different tail dependency, which could be used to predict the market future and provide market participants and policy makers with some suggestions on investment, hedging and decision making. • The dynamic copula with change in parameters and types is modeled. • A new method of applying Akaike Information Criterion into binary segmentation procedure is proposed. • The relationship between WTI oil prices and 300ENI returns have been studied. • Different economic state pairs of two markets exhibit different concordance and tail dependency. • The proposed model is applied to calculate the hedge ratio and hedging effectiveness of 300ENI against the WTI oil risk.

Asymmetric Impact of Crude Oil Cost on Diesel Price in Canada: Evidence from Nonlinear ARDL Model

This paper examined the retail diesel market in Canada for evidence of asymmetric price adjustment and rent-seeking arising from the fluctuations in crude oil prices over the period January 2005 to December 2015. The study used the recently introduced nonlinear ARDL model. The findings indicate sluggish speed of adjustment of 22% for both ex-tax prices and pump prices, which is typical of markets witnessing weak competition and prolonged periods of mispricing. However, the results further indicate that Canadian consumers of retail automotive diesel are sufficiently insulated from the fluctuations of the international crude oil market since the estimated long-run coefficients ranged between 0.60 and 0.69. At the 5% level, the results did not show significant evidence of long run asymmetry in the retail diesel market. In addition, the results did not indicate significant short run additive asymmetry at the 5% level or the prevalence of the rockets and feathers effect. The absence of the rockets and feathers effect also means that the market is free from the problem of rent-seeking by retailers. This is desirable and indicates that regulatory policies should continuously monitor the market in order to preserve competition and the overall social welfare. Keywords : Asymmetric Price Adjustment, Rockets and Feathers Effect, Nonlinear ARDL Model, Canada. JEL Codes: Q43; D40; C22; N12 DOI : 10.7176/JESD/10-4-14

Oil Price and Exchange Rate Nexus-Evidence From Nigeria

Price swings at international crude oil market significantly impact on macroeconomic fundamentals of oil dependent countries. Hence, understanding the relationship between oil price movement and the exchange rate has become imperative especially for oil exporting countries. This paper examines the causal effect between oil prices and Nigerian naira–US dollar exchange rate using frequency daily data for the period 12/07/2010-31/08/2017. Generalized autoregressive conditional heteroskedasticity (GARCH) and exponential GARCH (EGARCH) models were used to estimate our oil prices and nominal naira exchange rate equation. Our findings reveal a positive relation between oil price and naira exchange rate meaning that an upward movement in the price of oil causes the naira to depreciate. Conversely, any fall in oil price leads to appreciation in the value of the naira. The result has important policy implication given that 90% of the total annual foreign revenue of Nigeria comes from oil thus oil price shocks have severe impact on the Nigerian economy. This justifies the need for Nigeria’s economic diversification to minimize the vulnerability of the Nigerian economy to vagaries of the international crude oil market and to delink the exchange rate and reserve movement from developments in oil prices.

Risk spillover effects of international crude oil market on China’s major markets

This paper systematically evaluates the influence of international crude oil risk on Chinese macro-financial risks, by quantifying risk spillover effects from international crude oil market to China’s three major markets (stock, foreign exchange and commodity markets). Specifically, this paper initially calculates the risks of international crude oil market and China’s three major markets by adopting a conditional autoregressive value at risk (CAViaR) model, then the spillover index is used to capture the risk spillovers from international crude oil market to China’s major markets. The empirical results indicate that there exists significant heterogeneous risk spillover effects transmitted from international crude oil market to China’s three major markets. To be more specific, the risk derived from international crude oil market is always a dominant driving force of risk in China’s commodity market. However, the shocks of global oil risk do not affect much of the risks of China’s stock and foreign exchange markets in general. In addition, our results further report that international oil risk has considerable effects on China’s macro-financial risks during several specific periods, which can be attributed to several major events. Specifically, the risk spillovers originated from international crude oil market remarkably contribute to the risk of China’s commodity market during the period of global financial crisis. International crude oil risk makes great contribution to the risks of Chinese stock and foreign exchange markets, when several global notable events occur as well as major financial reforms in China are implemented. The empirical results have significant implications for policy-makers and market participants.

Tracing the Genesis of Contagion in the Oil-Finance Nexus

A new procedure to trace the sources of contagion in the oil-finance nexus is proposed. We do this by consolidating veteran rules derived from the empirical oil literature to filter oil supply, global demand, and oil demand shocks into discrete typical and extreme conditions. We show how these identified conditions can then be used to determine the stable and extreme sub-samples for comparing market relationships in the construction of contagion tests. Our original approach is useful for systemic risk assessment in countries vulnerable to oil market shocks. We illustrate the procedure using the dynamic relationships between the international crude oil market and the financial markets of a small oil-exporter.

Oil price volatility and its impact on economic growth and food security in Bangladesh

This study empirically examines oil price volatility and the impact of oil price changes on the growth of the economy and food security in Bangladesh. The study uses yearly data of macroeconomic variables from 1991 to 2015 and global food security index (GFSI) for the period 2012 to 2015. Furthermore, data of GFSI for previous four years have been simulated using exponential model. The GARCH (2, 1) model with minimum AIC postulates that volatility was high in the previous period and it has been continued to be lower in the current period (i.e. 2015). The co-integration test and error correction model exhibit that both in short-run and long-run case the increasing oil price negatively affected the growth of the economy. The simultaneous equations regression model using three-stage least squares estimator discloses that an increase in oil price declines the economic growth and food security simultaneously and significantly. Moreover, this study suggests that oil price volatility is not a good sign for the economy of Bangladesh, since, the country is an importer of crude oil, government policy should be quick responsive in relation to international oil market to create consistent oil market and sustainable economic development in Bangladesh.
 J. Bangladesh Agril. Univ. 16(3): 482–491, December 2018

ESTIMATION OF THE IMPACT OF SOME VARIABLES OF AGRICULTURAL ECONOMIC POLICY ON THE IRAQI DOMESTIC AGRICULTURAL PRODUCT FOR THE PERIOD 1994-2015 USING THE METHOD OF COINTEGRATION AND THE ARDL MODEL

The calculations of gross domestic product (GDP) show the contribution of each sector, whether Service fully or productively, to the formation of the national income.The agricultural sector is an important sector, although it did not take the lead in the composition of GDP because of the large contribution of the oil sector, especially in recent years, which witnessed the return of Iraq to the international oil market. The research aimed to measure the impact of some economic variables in agricultural GDP and analyze the role that these variables can play on the growth of this output, which can promote growth in the Iraqi agricultural sector. The research was based on the quantitative method to arrive at its results by following one of the modern methods to study the causal relationship, the method of multivariate cointegration, the ARDL model and the test of the causal relationship to determine the direction of the relationship between the economic variables studied, based on the assumptions of the economic theory. The study found that there is a long-term effect between the agricultural GDP index and the other economic variables under study and that there is a causal relationship between the long term and the short term.

The impact of OPEC on East Asian oil import security: A multidimensional analysis

East Asian countries, such as China, Japan and South Korea, are major importers in the international oil market. Therefore, oil import security is critical to sustainable economic development in these countries. This paper uses a modified two-stage DEA-like model to investigate the impact of the Organization of Petroleum Exporting Countries (OPEC) on oil import security in the East Asian region over time. Specifically, three dimensional variables were introduced to the model: the OPEC internal dimension, the OPEC and Asian country interaction dimension, and the international external dimension. The empirical results show a substantial difference between China and the other two countries in terms of these dimensions. Although the impact of OPEC on China's oil security has increased over time, its impact on Japan has declined. Political uncertainty in OPEC countries and oil price volatility are the major issues for China, whereas cost is the key area of concern for Japan. South Korea's concerns are less clear. The results of this study lay an important foundation for discussing policy issues involved in regional cooperation, integration and sustainable growth in the East Asian region.