Oil Market Developments Research Articles

Benchmark Prices and Iraqi Oil Prices: The Asymmetric Effects of Benchmark Prices on Three Iraqi Oil Blends

This paper examines the asymmetric effects of benchmark oil prices on the prices of the three major Iraqi oil blends (Basrah Light, Basrah Heavy and Kirkuk) using Kilian and Vigfusson's (2011) non-linear VAR specification. The empirical evidence reveals that a decrease in benchmark prices decreases Basrah Light and Kirkuk oil blends more than an increase in the benchmark increases the prices of these two Iraqi blends for the October 2002-October 2019 period. However, the asymmetric behavior of Basrah Heavy is the reverse for the April 2015-October 2019 period. Moreover, as the magnitude of the benchmark oil price shocks increases, the degree of asymmetry increases. This shows that Iraq cannot benefit from oil price increases and market developments for its two most important export blends: Basrah Light and Kirkuk.

Intermarket Analysis: Oil, Gold, US Dollar and Stock Market

The interdependence among the prices of oil, gold, the US dollar and stock market prices is of fundamental importance for any investment decision. This paper studies the bilateral relationships between these asset classes in order to identify direct and indirect relationships, positive and negative interactions by using regression analysis, and then tries to demonstrate if a simultaneous relationship exists between the four asset classes via the empirical methodology: the simultaneous equation approach. The international data used to do a regression analysis to identify the bilateral relationships between assets is from November, 2011 to October, 2021 on a monthly basis. The study relies on many theoretical findings to identify the negative or positive linkage. The main goal of quantifying these relationships, is to check if they are helpful in predicting and timing the next phase of the economic cycle. The findings reveal strong cross-market interactions. An inverse relationship between oil prices and stock prices was discovered, whereas gold and the USD had a large and positive impact on oil prices. Oil, USD, and stock market developments have an impact on the gold rate. The stock market, as well as the price of gold and oil, have a considerable negative impact on the US dollar. Therefore, after studying the relationships between those assets, the results will be helpful in predicting the economic cycle.

Problems of financing of technological innovation in oil production market

The article presents the results of the study of pricing problems in the world oil market in terms of dependence of the oil supply on the state of oil production companies. The authors attempted to examine the degree of dependence of oil production on such factors as the number of enterprises in the industry, average annual number of staff in them, production drilling volume, average daily production rate per well, degree of wear of fixed assets of companies, the number of commissioned production facilities, renewal of fixed assents of companies, profitability level, business activity of the enterprises in the industry. The study is based on the data characterizing the development of oil market within a relatively steady period. The global oil market is a delicate exchange market mechanism sensitive to changes in pricing trends in global commodity and financial markets. World oil pricing trends depend on many political, economic, seasonal, regional factors as well as the situation with the tanker fleet, etc. The aggravation of the crisis and expectations of businesses about the future dynamics of global oil prices impact currency exchange rates, stock quotes, retail and wholesale prices. The COVID-19 pandemics caused decrease in manufacturing and other economic activity which determine oil export volumes. The current situation forces most of oil cartel countries to reduce quotes. The state of oil production industry, supply and demand relation, stabilization of oil prices remain the key aspects of pricing in the oil market.

Развитие мирового рынка нефти и предпосылки его трансформации

Развитие мирового рынка нефти и предпосылки его трансформации

Oil and macro-financial linkages: Evidence from the GCC countries

We assess potential roles of recent oil price swings in macro – financial linkages for the case of the Gulf Cooperation Council (GCC) countries using bank-level panel data from 2000 – 2016. Employing both dynamic panel and panel VAR modelling, we document evidence indicating significant implications of oil price changes on the GCC financial and real sectors and significant macro – financial linkages. The results are robust in suggesting favourable effects of positive oil price changes on bank profitability, credit growth and output growth. Likewise, we document robust evidence indicating immediate contraction in credit growth, deterioration in credit quality and decline in economic growth following negative oil price changes. We also note that the implications of oil price changes tend to be felt more strongly by small banks. Finally, we find substantial causal interactions between output growth and bank variables, notable of which are robust findings of significant responses of (i) credit growth and bank profitability to business cycle and (ii) business cycle to credit quality. With the documented roles of oil prices on macro-financial linkages, the oil market developments should be monitored closely and, in anticipation of oil price drops, attention should be given to maintaining lending activity as well as safeguarding banks’ financial soundness such that the contraction of real activity can be contained.

非洲石油天然气市场开发中的HSSE风险预防与控制

非洲石油天然气市场开发中的HSSE风险预防与控制

Cap prices or cap revenues? The dilemma of electric utility networks

In this paper I analyse the behaviour of a monopoly electricity provider that serves three distinct markets under a price cap or revenue cap plan. I make comparisons in terms of their effects on price setting, energy conservation, and social welfare.In addition to contravening the Ramsey pricing rule, I find that under conditions of information asymmetry, when demand becomes more elastic or marginal cost increases, revenue cap price increases are larger relative to price cap regulation. In this specific setting, revenue cap price increases can encourage energy conservation but is less likely to do so when marginal cost is large in a market that is more elastic relative to others. In contrast to a price cap plan, these overall results show that revenue cap schemes are welfare-reducing.For public policy decision-making purposes, price cap regulation is more desirable especially in developing economies that often experience substantial inflationary pressures from global oil market developments but is less suitable than revenue cap regulation when electricity supply constraints and climate change are major policy concerns.

A statistical study of the short‐ and long‐term drivers of crude oil prices

AbstractThe paper statistically examines whether the fluctuations in crude oil prices over the last 10 years are due to speculative activities or changes in market fundamentals. Following a brief review of the oil market developments and speculative activities in recent years, the paper employs two multivariate time series models—the vector autoregressive model (VAR) and the vector error correction model (VECM)—to evaluate observed fluctuations in crude oil prices. The VAR and its granger test allow for the detection of factors responsible for fluctuations in crude oil prices, while the VECM tests the co‐integration of the variables. The VAR includes both fundamental and non‐fundamental variables as covariates. The VECM results show that in both the short‐ and long‐term the significant variables of the VAR model are co‐integrated. The empirical results confirm that in the long‐term the fundamentals are the main drivers of crude oil prices. However, in the short term, both fundamentals and speculative positions in the oil futures market differentially cause fluctuations in crude oil prices. The effect of the fundamentals is more than double in the long term, when compared to the short‐term.

‘SAUDI VISION 2030’: A VIABLE RESPONSE TO YOUTH ASPIRATIONS AND CONCERNS?

Since Deputy Crown Prince Mohammed bin Salman Al Saud unveiled Saudi Vision 2030 (The National Transformation Programme, 25 April 2016) a great deal of analysis has focused on the potential impact of Vision 2030 at the national level. Significantly, Saudi Vision 2030, which promises a better future and better governance, is raising hopes and expectations amongst young well-educated Saudis. Nevertheless, how has Saudi Vision 2030 been interpreted by young educated male Saudis many of whom are struggling to enter the labour market at a time of austerity and economic uncertainty? This paper discusses young male perceptions of Saudi Vision 2030 including their expectations and hopes for the Vision. In fact, an understanding of how young Saudis perceive Vision 2030 is not only pertinent in the Saudi national context (or indeed multiple Saudi domestic contexts), but also has wider regional relevance considering oil-market developments and economic policy.

Do Oil Prices Influence Unemployment Rate in Texas?

Recent recovery in the world oil prices and the positive performance of major oil company stocks has raised the prospects of major oil and natural gas producing states, such as Texas. High oil prices are interpreted as good news for Texas economy and the labor market. However, the impact of the oil market developments on the state’s employment level needs more scrutiny. Contradictory to theory and to several earlier empirical studies, we find that oil price swings have no effect on the unemployment rate in Texas. Even when structural breaks and time varying correlations are considered, neutrality of the state’s unemployment rate to oil market developments persists. DCCs imply that association between oil price/interest rate and unemployment rate did not change over time. Hence, higher (lower) oil prices may not lead to lower (higher) unemployment rate in Texas.

OPEC vs US shale: Analyzing the shift to a market-share strategy

In November 2014, OPEC announced a new strategy geared towards improving its market share. Oil-market analysts interpreted this as an attempt to squeeze higher-cost producers, notably US shale oil, out of the market. Over the next year, crude oil prices crashed, with large repercussions for the global economy. We present a simple equilibrium model that explains the fundamental market factors that can rationalize such a “regime switch” by OPEC: (i) the growth of US shale oil production; (ii) the slowdown of global oil demand; (iii) reduced cohesiveness of the OPEC cartel; and (iv) production ramp-ups in other non-OPEC countries; while (v) reductions in US shale costs act against these factors. We show that these qualitative predictions are broadly consistent with oil market developments during 2014–2015. The model is calibrated to oil market data; it predicts accommodation up to 2014 and a market-share strategy thereafter, and explains large oil-price swings as well as realistically high levels of OPEC output.

Modernisation of the Russian Energy Sector: Constraints on Utilising Arctic Offshore Oil Resources

This essay examines the modernisation of the Russian energy sector as revealed in the case of Arctic offshore oil. The Russian actors involved have various interests but their simultaneous realisation is impeded by the structural constraints within the policy environment of Arctic offshore oil projects. Russia’s foreign policy choices vis-à-vis Ukraine, leading to sanctions targeting Arctic oil projects, and global oil market developments amplify the constraints on the resource geographical, financial, institutional and ecological dimensions of the policy environment or structure. This delays Arctic offshore oil projects, and hampers the oil industry’s modernisation and its capacity to generate income for Russia’s overall modernisation.

An Analysis of OPEC's Strategic Actions, US Shale Growth and the 2014 Oil Price Crash

In November 2014, OPEC announced a new strategy geared towards improving its market share. Oil-market analysts interpreted this as an attempt to squeeze higher-cost producers including US shale oil out of the market. Over the next year, crude oil prices crashed, with large repercussions for the global economy. We present a simple equilibrium model that explains the fundamental market factors that can rationalize such a regime switch by OPEC. These include: (i) the growth of US shale oil production; (ii) the slowdown of global oil demand; (iii) reduced cohesiveness of the OPEC cartel; (iv) production ramp-ups in other non-OPEC countries. We show that these qualitative predictions are broadly consistent with oil market developments during 2014-15. The model is calibrated to oil market data; it predicts accommodation up to 2014 and a market-share strategy thereafter, and explains large oil-price swings as well as realistically high levels of OPEC output.

An Analysis of OPEC's Strategic Actions, US Shale Growth and the 2014 Oil Price Crash

In November 2014, OPEC announced a new strategy geared towards improving its market share. Oil-market analysts interpreted this as an attempt to squeeze higher-cost producers including US shale oil out of the market. Over the next year, crude oil prices crashed, with large repercussions for the global economy. We present a simple equilibrium model that explains the fundamental market factors that can rationalize such a regime switch by OPEC. These include: (i) the growth of US shale oil production; (ii) the slowdown of global oil demand; (iii) reduced cohesiveness of the OPEC cartel; (iv) production ramp-ups in other non-OPEC countries. We show that these qualitative predictions are broadly consistent with oil market developments during 2014-15. The model is calibrated to oil market data; it predicts accommodation up to 2014 and a market-share strategy thereafter, and explains large oil-price swings as well as realistically high levels of OPEC output.

How Much Did Oil Market Developments Contribute to the 2009 Recession in Germany?

AbstractIn this paper, we use a structural vector autoregressive model to study the effects of oil market developments on the German economy. We find that higher oil prices are always associated with a decline in private consumption expenditures, but the response of gross domestic product (GDP) crucially depends on the underlying shock. While a disruption in oil supply provokes a recession, positive world demand shocks prompt a temporary increase in exports and investment, which initially outweigh the cutback on consumption. In a counterfactual analysis, we show that the world demand shocks that led to the 2007/2008 oil price rise triggered a delayed 0.8 percent decrease in German GDP in 2009, and therefore notably contributed to the recession of that year.

Macroeconomic Shocks in an Oil Market VAR

This paper studies oil market and other macroeconomic shocks in a structural vector autoregression with sign restrictions. It introduces a new indicator for oil demand, and uniquely, performs a sign restriction set-up with a penalty function approach in an oil market vector autoregression. The model also allows for macroeconomic shocks in the US. The results underline the importance of the source of an oil shock for its macroeconomic consequences. Oil supply shocks have been less relevant in driving real oil prices, and had less of an effect on US inflation than demand shocks. Overall, the effects of oil shocks on US real activity have been relatively limited, as also highlighted by a counterfactual experiment of recent oil market developments.

Modelling the world oil market: Assessment of a quarterly econometric model

This paper describes a structural econometric model of the world oil market that can be used to analyse oil market developments and risks. Oil demand depends on domestic economic activity and the real price of oil. Oil supply for non-OPEC producers, based on competitive behaviours, is constrained by geological and institutional conditions. Oil prices are determined by a “price rule” that includes market conditions and OPEC behaviour. Policy simulations indicate that oil demand and non-OPEC supply are rather inelastic to changes in price, while OPEC decisions about quota and capacity utilisation have a significant, immediate impact on oil prices.

Oil Market Developments and Issues

The discussion in this paper of the causes and consequences of recent oil price increases, and the appropriate policy response, is framed by the volatility and uncertainty that characterize the oil market. Volatile prices arise from supply and demand that are both highly inelastic in the short run, with the result that even small shocks can have large effects on price. The difficulty of predicting long-run supply and demand creates uncertainty about future prices. Further, even current supply and demand data are lacking, which results in additional uncertainty. These features of uncertainty and volatility of prices make it difficult to reach simple conclusions about how oil producers and consumers should respond to price changes.

Oil and Gas Market Developments in Turkey

Oil and Gas Market Developments in Turkey

Oil and Gas Market Developments in Turkey

Turkey’s strategic location makes it a natural “energy bridge” between major oil and gas producing areas in the Middle East and Caspian Sea regions on one hand and consumer markets in Europe on the other. Oil consumption has increased in recent years in Turkey, and this trend is expected to continue, with growth of 2–3% annually in coming years. The annual oil consumption of the country is around 31.3 million tons, while 83% of total consumption is supplied from imports and only 17% is supplied from indigenous production. Oil provides around 43% of Turkey’s total energy requirements, but its share is declining (as the share of natural gas rises). On the other hand, due to diversification efforts of energy sources, use of natural gas was newly introduced into the Turkish economy in 1987 and has been growing rapidly. Turkey’s natural gas reserves seem limited and current gas production in the country meets 2.8% of domestic consumption requirements. The annual natural gas consumption of Turkey is around 14.7 billion m3 and is assumed to increase by 12% per annum. Turkish natural gas use is projected to increase dramatically in coming years, with the prime consumers expected to be industry and power plants. Turkey has chosen natural gas as the preferred fuel for the massive amount of new power plant capacity to be added in coming years.