Oil Price Fluctuations Research Articles

Oil prices and exchange rates causality: New evidences from decomposed oil prices shocks and parametric in quantile analysis

In this paper, the researchers reassess the causality between oil prices and exchange rates by applying the parametric quantile analysis to decomposed oil prices shocks and exchange rates returns data of both low income, emerging and developed oil exporting countries from 1993.11 to 2021.10. Unlike the existing researches using the causality in quantile analysis, our study outcomes support the causal relationship from exchange rates to oil prices shocks at upper and lower quantiles in developed oil exporting countries; this is also true regarding the bidirectional causality observed in low income and emerging oil exporting countries .These findings imply that, important positive and negative oil shocks cause extremes changes in the exchange rate returns of low income and emerging oil exporting countries and reciprocally. However only extreme fluctuations of exchange rate returns of developed oil exporting countries such as Norway and Canada can cause oil prices variations. The results of non-causality at middle quantiles also suggest that the monetary authorities in both developing and developed oil exporting countries resist the exchange rates adjustments when oil prices fluctuations are significant. From these results we recommend sound policies in order to mitigate internal and external shocks during crisis, structural reforms that support diversification of energy production by developing other energy sources and reduce crude oil dependence, as well as the whole economy diversification mostly for developing countries and finally, multiple exchange rates to diversify portfolio and hedge the risks associated to oil prices fluctuations for investors. Keywords: Exchange Rates, Oil Prices Shocks, Quantile Causality.

Unveiling the impact of oil price shocks on global sukuk markets: a focus on quantile coherence and time-frequency connectedness

ABSTRACT This study examines the relationship between oil price shocks and Islamic bonds in 15 global markets. We focus on how they are connected in terms of time and frequency, specifically in quantiles. Through a quantile coherency approach, we discover that oil price shocks affect sukuk indices differently depending on the type of shock. When we increase the frequency of analysis from once a year to once a month, we observe a significant increase in coherence values of oil risk shocks across the majority of sukuk indices of oil exporting nations in both the lower and middle quantiles. Furthermore, based on quantile cross-spectral coherence analysis, we notice that the extreme quantile dependence between oil price shocks and the majority of the oil exporting nations’ sukuk indices remains stable over a short-time horizon. Our research indicates that demand shocks have a significant impact on the correlation between sukuk markets during uncertain periods, such as COVID-19 and the Russian-Ukraine war. Our findings provide a credible understanding of the behaviour of sukuk indices in response to fluctuations in oil prices, which is important for investment portfolio managers and policy decision-makers.

OIL PRICES-GROWTH NEXUS IN ALGERIA USING THE MEDAS MODEL

Objective: This Article aims to investigate the impact of oil price fluctuations on economic growth in Algeria using the Mixed Data Sampling (MIDAS) model during the period 1990-2022 Theoretical Framework: The theoretical aspect addressed the different time-frequency models by defining the Midas models and addressing the weighting functions used in estimating these models. Method: Estimating the relationship between a high-frequency variable (oil price) and a low-frequency variable (economic growth rate GDP) using the MIDAS model using Almon's PDL Weighting Function. Results and Discussion: The results of the study concluded economic growth in Algeria is directly affected by oil prices, The study also found that MIDAS models have a great predictive ability, allowing researchers to utilize all available information for high-frequency variables, instead of using annual average values that lose a lot of information. avoid converting low-frequency variables to match high-frequency variables, reducing econometric issues in model diagnostics. Research Implications: Research Implications: It is suggested that rentier countries such as Algeria work to diversify their economy away from oil, and follow up the process of economic diversification and accelerate it during periods of high fuel prices by working to develop non-strategic sectors as agriculture, tourism and manufacturing industries. Originality/Value: These results are expected to benefit policymakers in government, by urging them to invest in renewable energies as a crucial strategy for achieving sustainable development and a key factor in mitigating oil price shocks, particularly during recent recurring global crises. Future research directions include exploring existing gaps and promoting standardized studies.

Unveiling an asymmetric relationship between global crude oil and local food prices in an oil-importing economy

AbstractRecent swift comovements of local food and global crude oil prices have attracted the attention of policymakers and researchers. To evaluate this relationship, many studies have used time series models to explore global crude oil and local food prices. However, robust research based on advanced nonlinear time series models that incorporate control variables for their formation is lacking. In this paper, nonlinear techniques are applied to assess the asymmetric nexus between Brent oil prices and local retail food prices in Slovakia. To estimate this value, we extend the single-threshold NARDL approach to the MTNARDL model. The nominal exchange rate and industrial production index are used as the control variables. Compared with conventional NARDL models, the MTNARDL model provides a more detailed representation of global oil‒local food price linkages and detects the asymmetric effect of global oil prices on food prices from both long- and short-term perspectives. Interestingly, with respect to long- and short-term food price volatility, changes in response to oil price fluctuations are greatest under a regime with rather a small number of positive and moderate changes.

How volatility in the oil market and uncertainty shocks affect Saudi economy: a frequency approach

In this study, spectral Granger causality analysis is employed to investigate the spectral dynamics of uncertainty transmission and its impact on economic growth and financial development in Saudi Arabia from 1993 to 2020. We examine the relationships between crude oil volatility, geopolitical risk, global economic uncertainty, financial development (measured by market capitalisation, MCGDP, Financial Institutions Access Index, FIAIX) and economic growth. The empirical results show that negative shocks in crude oil volatility have a significant impact on financial development as measured by the MCGDP, with capital flight and reduced domestic investment playing key roles, despite the effective contribution of increased government spending to mitigate these effects. In this study, spectral Granger causality analysis is employed to investigate the spectral dynamics of uncertainty transmission and its impact on economic growth and financial development in Saudi Arabia from 1993 to 2020. We examine the relationships between crude oil volatility, geopolitical risk, global economic uncertainty, financial development (measured by market capitalisation, MCGDP, Financial Institutions Access Index, FIAIX) and economic growth. The empirical results show that negative shocks in crude oil volatility have a significant impact on financial development as measured by MCGDP, with capital flight and lower domestic investment playing a key role, despite the effective contribution of increased government spending in mitigating these effects. However, looking at the FIAIX, crude oil volatility has a different impact, with positive shocks having no significant impact on financial development. In contrast, negative shocks show long-term causal effects, which emphasises the vulnerability of the banking sector to oil price fluctuations. Geopolitical risk has a significant long-term impact on the MCGDP due to uncertainty shocks caused by regional and global geopolitical measures. For geopolitical risk, the results are mixed with a significant causality of negative shocks on the FIAIX over certain frequencies, emphasising the sensitivity of the banking sector to geopolitical tensions. In contrast, the world economic uncertainty has only a limited direct impact on the FIAIX, indicating the resilience of the Saudi financial sector to fluctuations in global uncertainty. In terms of economic growth, positive shocks have a greater impact than negative shocks due to the volatility of crude oil. However, shocks resulting from geopolitical risks, whether positive or negative, have little effect on economic growth. The industrial production index, a measure of the resilience of the Saudi economy, indicates that it is susceptible to positive shocks from fluctuations in oil prices over a range of time periods. Our study’s findings can assist Saudi Arabia’s authorities in fortifying the country’s financial and economic resilience against the spread of uncertainty. For strong financial development and sustainable economic growth, these uncertainty elements must be well monitored.

The role of oil revenue in shaping Iraq's public budget

The objective of this paper was to give a wide overview of the background of Iraq’s economy during last five decades. From the previous studies, it is evident that oil export has made a significant contribution to the Iraqi economy. This contribution, as we have analyzed took the form of periodic injections of purchasing power into the domestic economy. However, changes in the country's earnings were mostly influenced by crude oil revenues, reflecting global prices of oil and daily level of oil production. Then the fluctuating oil price and production levels disturb this injection and also disturb whole Iraqi economy. Due to changing oil revenue, the structure of Iraqi economy significantly changed from tradable goods sectors to non-tradable goods sector. Apart from that the contribution of oil sector to GDP has significantly increase and government expenditure also increased sharply. The outcomes is shown in data via tables and figures throughout the period of 1970-2013.

Examining dynamics: Unraveling the impact of oil price fluctuations on forecasting agricultural futures prices

Examining dynamics: Unraveling the impact of oil price fluctuations on forecasting agricultural futures prices

Reflections of Economic Shocks and Price of Crude Oil on Gold Price Volatility within Asian Nations

The focus of this study is to examine the effects of economic shocks along with the crude oil price on gold prices in Asian countries. This study utilizes a regression analysis to measure the relationship between the macroeconomic indicators, crude oil price, and gold price in six selected nations from 1990 until 2022. The validity of the data was diagnostically checked by performing a VIF procedure, autocorrelation test, and normality test on residual, and data were analyzed via EViews software. The analysis showed mixed findings, however, a major variable that positively affects the fluctuation of the gold price is “the crude oil price” and it reflects global economic stability in the six countries. A sudden rise in crude oil prices might trigger conflicts in oil-exporting countries and limit access to material sources. This situation may force investors to move their funds into a safe-haven commodity like gold. The fluctuations in crude oil prices are not only a response to current market conditions but also alarming a lot more fundamental problems in an economy, which include approaching economic recessions, currency devaluation and a major financial crisis. For practical implications, this study suggests that policymakers pay extra attention to this commodity besides other economic indicators like inflation, interest and currency rates, and a GDP rate to ensure a sustainable economic condition. To the best of the authors’ knowledge, this study is the first that examines the economic shocks along with crude oil prices pre-and-post COVID-19 pandemic focusing on a few Asian countries.

Seasonal price variation analysis of palm oil: case study of Nigeria (2016–2022)

To enhance the benefits derived from palm oil processing by the farmers, there is a need for the producers (farmers) and buyers of palm oil to understand the seasonal price for making informed decisions on when to buy and sell the commodity. In order to determine price at the appropriate time of the season, the study looked at the seasonal price variation analysis of palm oil and the relationship between producers and buyers. This was done by understanding buyers’ requirements, producers’ effort, measurements taken, and contracting with buyers’ credit from customers. A multiphase sampling strategy was used. Organized interviews and questionnaires were utilized to collect primary data, while the National Bureau of Statistics provided secondary time series data on the average monthly retail price of palm oil from 2016 to 2022. The need for bio-fuel, production growth, governmental regulations, market dynamics, and the seasonality of palm oil products are then identified by the study as important factors influencing palm oil price fluctuation throughout the year. The study then suggests that there’s a need for economic diversification to reduce reliance on a single sector. This study will serve as a basis for future research on palm oil price variation analysis.

Oil Price and Long-run Economic Growth in Oil-importing Developing Countries

The recent spikes in oil prices are a significant setback for the world economy, which has already faced multiple challenges due to the COVID-19 pandemic. This is particularly concerning for developing countries as maintaining a sustained growth in real GDP is crucial for lifting their population out of poverty. While the short-run negative macroeconomic effects of a spike in oil prices are well established in the context of the developed world, the long-run growth effect has received little attention, especially in developing countries. Using the World Bank's development indicators database covering the period 1990 to 2020, this study aims to investigate the oil price-growth nexus in low and middle-income net oil-importing countries to shed light on how oil price increases could be a challenge for sustainable development. Specifically, we first set up a theoretical model to establish the relationship between growth in output per capita and oil price. Following the traditional growth regression approaches, we empirically estimate the causal effect of growth in oil prices on the economic growth of 65 net oil-importing developing countries using fixed effect panel IV regression methods. The empirical results confirm statistically significant negative effects of oil prices, indicating that a higher oil price reduces long-run economic growth in oil-importing developing countries. Our results on the other determinants of growth are consistent with the existing empirical growth literature. Oil-importing developing countries, therefore, must allocate resources towards alternative domestic energy sources, in addition to pursuing fuel efficiency and conservation strategies, to mitigate the negative effects of oil price fluctuations on their long-run economic output and uphold sustainable development.

Exploring vehicle preference dynamics: Analyzing the influence of oil price volatility on consumer car purchase decisions - A comparative survey experiment

China's automobile market is continuously expanding, leading to ongoing growth in oil demand. Fluctuations in oil prices will inevitably impact the travel patterns and car purchasing behavior of automotive consumers. This paper analyzes the influence of gasoline price fluctuations on the travel patterns and car purchasing behaviors of auto consumers with varying incomes, employing a dynamic perspective. We conducted a questionnaire survey of auto consumers in four first-tier cities in China and performed a comparative analysis of questionnaire data from 2015 to 2022. The empirical findings are as follows: (1) Under conditions of elevated oil prices, fuel car consumers exhibit an increased susceptibility to oil price fluctuations, which may cause fuel car consumers to curtail their travel activities. (2) The 10 yuan/liter is the threshold for middle - and upper-income consumers to change their car buying or travel habits, which has not been affected by oil price fluctuations. (3) For the cohort considering electric vehicles, gasoline prices stand as the primary determinant influencing their car buying choices. The primary conclusions serve as significant references for the government to craft corresponding carbon emission reduction policies amidst fluctuating oil prices.

Revolutionizing efficiency: The path to sustainable oilfield services in Indonesia's energy landscape – The case of Pertamina drilling services

PurposeThis study explores strategic and technological approaches for sustainable oil production in Indonesia, focusing on policy frameworks, eco-innovation, and supply chain resilience to align with national and global standards. It also analyzes the organizational transition of Pertamina Drilling Service Indonesia (PDSI) to better navigate industry challenges with the outcome of a framework sustainable practices. Design/methodology/approachUtilizing Soft Systems Methodology (SSM) to analyze primary qualitative data, the research examines PDSI's adaptation to depict the current business environment and challenges both domestically and globally, addressing industry demands. It focuses on operational objectives, strategic asset management, regulatory compliance, and market positioning. SSM offers a comprehensive framework for understanding and modeling the organizational changes within PDSI. FindingsThe transition to a functional organizational structure has led to enhanced operational efficiency, clearer role definition, and improved employee retention and development strategies at PDSI. The study also highlights the industry's challenges, including high risks, capital intensity, environmental concerns, and fluctuating oil prices, and how PDSI is strategically responding to these challenges. Research limitations/implicationsThe study faces limitations due to reliance on specific data sources and the inherent complexity of the oil and gas sector. However, it offers valuable insights into the dynamics of organizational change in a high-risk industry. Practical implicationsThe findings provide a roadmap for PDSI in addressing operational efficiency, human resource management, and organizational agility. This includes aligning business expansion with environmental sustainability and enhancing competitiveness through technological innovation. Social implicationsBy focusing on strategic employee development and retention, the study underscores the importance of human capital in the oil and gas industry, impacting social aspects of business operations. Originality/valueThis research contributes to the understanding of organizational transitions in the oil and gas sector. It offers a unique perspective on how PDSI can achieve sustainable growth and industry leadership through a functional organizational structure, underlined by a comprehensive framework emphasizing efficiency, adaptability, and continuous improvement.

Does oil price uncertainty affect corporate total factor productivity? Evidence from China

In the era of high-quality economic development, oil price volatility (OVX) and the total factor productivity (TFP) of corporations are pivotal issues for both policymakers and scholars. This study leverages the implied volatility of oil prices and financial data from Chinese listed industrial companies spanning 2010 to 2022 to investigate the influence of OVX on firms’ TFP and the underlying mechanisms. The findings reveal that OVX substantially dampens firms’ TFP, with corporate leverage and financialization identified as key channels through which this impact occurs. Further heterogeneity analysis indicates that the negative impact of OVX on TFP is particularly pronounced in firms operating in industries with low concentration and among small and medium-sized enterprises (SMEs). The extension analysis suggests a threshold effect in the relationship between OVX and corporate TFP, with the suppressive effect of OVX on TFP intensifying as the level of corporate financialization increases. Consequently, it is imperative for policymakers to closely monitor oil price fluctuations and implement timely strategies to mitigate the risks associated with OVX.

Cyclinaclity Effects of Exchange Rates and Oil Prices

Understanding the concept of time scales is crucial when modeling economic and financial decisions. Within the time-frequency domain, this study delves into the relationship between fluctuations in oil prices and exchange rates across major oil-importing and exporting countries. The investigation employs various cross-wavelet techniques within the continuous wavelet transform framework, with a particular focus on wavelet coherence and phase-difference over the period 2000 to 2020. The results underscore a notable diversity in the connection between the oscillations of oil prices and exchange rates across diverse countries. This relationship is subject to temporal variations and is contingent upon the specific time horizon under consideration. In particular, our analysis reveals strong co-movements between oil prices and exchange rates across various time intervals and frequencies. Importing oil countries like New Zealand, Singapore, Brazil, and Taiwan exhibit particularly pronounced co-movements. Similarly, exporting oil countries such as Kuwait, Mexico, Russia, and Canada also display strong associations between oil prices and exchange rates. These correlations are intricately tied to key macroeconomic events, further highlighting the complex interplay between oil prices and exchange rate movements in different global regions. While a robust connection is evident in numerous countries, the strength of the relationship appears significantly weaker in several others. This variance underscores the nuanced nature of the association between the fluctuations in oil prices and exchange rates across the global landscape.

Oil price fluctuations and their relationship to government spending in Iraq for the period 2004-2022

The study aimed to know the fluctuations in global oil prices and their relationship to government spending in Iraq for the period 2004-2022, and to know their positive and negative effects and repercussions on the country’s general budget. The study was based on a set of hypotheses, the most important of which is: There is a positive correlation between fluctuations in global oil prices and government spending in Iraq. The descriptive analytical method was used in order to reach the results, the most important of which were the growth rates of total government spending, as they also varied greatly between rising at times and falling at other times throughout the study period. There is a complete direct relationship, which is demonstrated by the identical time path for the two series, which means that crude oil prices, whether average global prices, Basra Light oil prices, or others, are the influential and decisive factor in the volume of oil revenues.

Revisiting the Nexus Between Oil Prices and Economic Activity for Asian Economies Using MIDAS

The objective of this paper is to re-examine the causal relationship between oil prices and economic activity for five Asian economies. We apply the unrestricted MIDAS (U-MIDAS) model using monthly data for real oil prices and quarterly data for real GDP for the period from 1998Q1 to 2019Q4. The causal nexus between oil prices and economic activity is also studied by means of wavelet analysis to investigate whether the relationship between the variables changes over different time scales. The key empirical results under the MIDAS approach show that there is a clear significant causal link from oil prices to economic activity, which is not as clearly found under the standard VAR approach. In addition, our results using impulse response functions suggest that the five Asian economies respond, in general, positively in economic activity to an oil price shock at shorter time horizons (less than two years), while the positive responses switch to mostly negative ones at longer time horizons (from two to four years). Our results, in general, support that the (theoretically) expected negative causal nexus between oil price fluctuations and economic activity for oil importers is dominant over longer time horizons for our dataset. An exception to this pattern is China, which has a dissimilar country profile in terms of its oil market and production structure from the profiles of the other Asian economies in the study. JEL Classification: C32, E32, O53, Q43

Oil price shocks and human capital channels in Nigeria

Nigeria faces persistent challenges of high unemployment and poverty, worsened by its over-reliance on the oil sector. While many studies have investigated the relationship between oil price volatility and human capital development, few have examined how this relationship impacts both basic and advanced human capital channels in developing economies; this study addresses that gap by using a Structural Vector Auto Regression (SVAR) approach to investigate how oil price shocks influence human capital channels. Co-integration tests reveal significant long-term relationships among the variables. For the basic channel, oil price shocks are negatively associated with secondary school enrollment but positively linked to primary school enrollment. In the advanced channel, oil price has a positive effect on government expenditure on tertiary education but negatively affects tertiary institution enrollment. The impulse response function confirms that oil price fluctuations significantly affect both basic and advanced channels of human capital. The findings show the detrimental impact of oil price shocks on Nigeria's human capital development, which may negatively affect sustainable development. The study emphasises the urgent need for economic diversification to reduce the economy's vulnerability to oil shocks and promote long-term growth and human capital development.

The Role of Oil in Iraqi Politics: From Independence to the Beginning of the Twenty-first Century

This study reviewed how oil affected Iraq's internal and foreign policies throughout contemporary history, as it sought in its goal to identify the role of oil in Iraqi politics from independence until the beginning of the twenty-first century, and to achieve the goal of the study, the descriptive analytical approach was relied on, and the historical method, in order to identify the scene of Iraqi politics and the impact of oil and its role in the political practices of the Iraqi state since independence until the beginning of the twenty-first century, and the importance of the study is due to the importance of oil The first is the importance of oil in Iraq, and it has two requirements, the first is a brief summary of the history of the importance of oil in Iraq The second demand focused on the status of oil in the period following the independence of the Iraqi state. .and the second section was entitled Oil crises and their repercussions on Iraqi policy, and it has two requirements, the first dealt with the crisis The first oil and its repercussions on Iraqi politics, and the second requirement dealt with the second oil crisis and its repercussions on Iraqi politics, then came the third section entitled the role of oil in the political scene of the State of Iraq, and it has two requirements, the first talked about the political situation of the State of Iraq at the beginning of the 21st century and the role of Iraqi oil in the international scene, The second and final requirement of the study focused on Iraq's political and economic landscape in the aftermath of 2003; The study also explored the role of oil in the reconstruction of the Iraqi state. It uncovered several key findings, among which the most significant are: the management of oil in Iraq is synonymous with the management of all industrialized nations. The post-2003 period brought about transformative changes, as Iraq's oil market endured severe crises. Politically, the lack of democracy and the challenges of establishing a more democratic system in Iraq can only be fully understood by considering the economic dimensions, particularly the role of oil. The study highlighted that Iraq faced significant market risks and oil price fluctuations. Additionally, the invasion of Iraq in 2003 and the subsequent period up to 2011 confirmed that historical narratives about Iraq remain deeply influential. Although there are multiple political reasons for the invasion of Iraq, all reconstruction policies and projects after the invasion also relied on the oil sector, and the study justifies that the Iraqi state cannot withdraw from the economic scene, but will be forced to adopt economic policies, However, oil remains a political and strategic commodity over which no country can cede control to non-state actors.

Energy price and returns: a threshold heteroscedasticity model approach

ABSTRACT The energy market is characterized by its intricate dynamics, influenced by various factors that result in erratic behavior, making it challenging to model energy price returns and volatility. In energy market, the changes in Brent and West Texas Intermediate (WTI) crude oil price yields and volatility are the focus of great interest and attention. Due to the influence of different periods and some economic factors, the fluctuation of crude oil price shows asymmetric characteristics. For exploring the asymmetric characteristics of energy market, we introduce the application of the threshold double autoregressive (TDAR) model to handle the complexities of energy price returns and volatility. The TDAR model is able to capture nonlinearities and regime shifts in the oil market, making it particularly suitable for understanding the inherent complexities in crude oil price movements. The empirical results implied that TDAR model demonstrates superior performance in capturing the intricate dynamics of crude oil prices compared to traditional asymmetric GARCH-type models, making it a valuable tool for market practitioners and policymakers. Our findings reveal the subtle movements in Brent and WTI prices and offer valuable insights for risk management and investment strategies, which provide an alternative for market practitioners and policymakers.

The Impact of Oil Price on Carbon Dioxide Emissions in the Transport Sector: The Threshold Effect of Environmental Policy Stringency

Carbon dioxide emissions from the transport sector make a significant contribution to global greenhouse gases, and understanding the factors that influence these emissions is beneficial for devising effective emission reduction policies. Oil prices are an important influencing factor since the fuel used in the transport sector is primarily based on oil, and fluctuations in oil prices directly impact the sector’s CO2 emissions. Additionally, environmental policies, as a key means of controlling CO2 emissions, can affect the relationship between oil prices and CO2 emissions in the transport sector. Therefore, this study aims to examine the impact of oil prices on CO2 emissions in the transport sector and explore the nonlinear role of environmental policy stringency in this relationship. Based on data from 27 OECD member countries and 6 non-member countries from 1990 to 2019, we used the environmental policy stringency index as a threshold variable to construct a panel threshold regression model. The analysis results indicate a double-threshold effect: when the environmental policy stringency index is low, the impact of oil prices on CO2 emissions in the transport sector is not significant. However, when the index reaches the first threshold, the impact of oil prices significantly increases; upon reaching the second threshold, the effect is further intensified. This paper also analyzes the three subindicators—market-based policies, non-market-based policies, and technology support policies—to clarify the distinct impact mechanisms of different types of environmental policies. Finally, based on the research findings, we propose policy recommendations to achieve carbon dioxide emission reduction targets in the transport sector.