OPEC Countries Research Articles

On the Efficiency of Stock Markets: A Case of Selected OPEC Member Countries

The study investigates the stock market efficiency of selected OPEC member countries within the context of random walk hypothesis and volatility approaches using monthly data on stock market indices from January, 2005 to April, 2016. Parametric (variance ratio: homoskedastic and heteroskedastic martingale), nonparametric (the Wright ranks and scores) tests and ARCH type estimation are performed. Results of both parametric and nonparametric tests indicate that only Qatar's stock market is weak-form efficient. The volatility results suggest that monthly stock returns of OPEC countries are volatile, with Qatar being most volatile and shocks to volatility of stock returns are asymmetric. The implications of this are that: first, investors should be conscious of these shocks when making risk-return decision of their portfolios; second, the results provide useful information to regulators to enable them develop safeguard mechanisms to shield the market from possible asymmetric information emanating from the participants.

Environmental Kuznets Curve for CO2 emissions: An analysis for developing, Middle East, OECD and OPEC countries

Abstract The purpose of this study was to determine the relevance of the Environmental Kuznets Curve, which shows that there is an inverted-U shaped relationship between environmental pollution and economic growth. We investigated the relationship between per capita income and the carbon dioxide emissions as indicators of environmental pollution in Developing Countries, OECD, Middle East and OPEC countries for the period of 1970-2016. The contribution of our study is the evaluation and comparison of Developing Countries, OECD, Middle East and OPEC countries together in the context of EKC. We employ the fixed effect and GMM techniques in this study and results obtained from cubic models indicate that the N-shaped relationship for Developing, Middle East countries and OECD countries and inverted N-shaped relationship for OPEC countries exist. Considering these conclusions, we draw some serious policy implications for the policy makers in these countries. Governments should closely follow the industries that generate CO2 emissions as after some point environmental degradation increases again as income increases. In addition adopting clean energies including wind and solar systems and making these technologies widespread across countries might reduce CO2 emissions. Another alternative way to reduce CO2 emissions might be a carbon tax which should be implemented for polluters.

Double Dutch Disease - Emigration as a Human Resource Curse on the Sudan

Structural adjustment started in Sudan in 1978 but no real devaluation nor effective liberalisation was achieved. Declining exports and persistent inflation were not solely the result of the Sudan’s lax fiscal policies, distorted markets and structural weaknesses. Sudanese emigration to OPEC countries and the Dutch-disease effect of the emigrants’ hard-currency remittances had a greater impact; one which was reinforced by an inherited service-sector bias to the Sudanese state. These factors rendered powerless the standard prescriptions of devaluation and market liberalisation. An extensive debate over those policies between the IMF, Sudanese economists and others was in fact irrelevant. Even if Government had shown far greater capacity to implement a coherent policy of fiscal and economic reform, the loss of up to two thirds of the skilled labour force and remittances equivalent to 2% of GDP would still have driven the Real Exchange Rate up and productivity in tradeable sectors down. A standard model of booming sector economics is used to develop a theory for this special form of Dutch Disease and the way the effects were compounded by its direct impact on Government. This model may have lessons to teach for other countries which have experienced mass labour emigration.

Russian Oil and Gas Sector in 2017

The oil and gas sector is playing an important role in the income generation for the state budget and Russia’s trade balance. In 2017, the volumes of crude oil production somewhat fell owing to Russia’s commitments to curb production as a result of the oil output cut agreement between some OPEC and non-OPEC countries. Under the so-called tax maneuver in force in the oil industry, refining depth went up, production and export of fuel oil moved down and export of crude oil, a highly lucrative source of state budget revenues, increased. In 2017, natural gas production and export hit an all-time peak. Despite the plunge of oil and gas world prices, the oil and gas sector continues to constitute over a half of Russian exports.

Comments: The Inevitable Price Cycle

Editor's column Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman met in mid-June on the sidelines of a World Cup game in Moscow to discuss oil prices and diplomacy ahead of the recent OPEC meeting. It was the latest effort to wrest control of oil prices that began with the historic Vienna production cuts in 2016 that rescued the oil market, and the most recent in a long line of attempts to control the oil price cycle. The production cuts worked. The OPEC members and several largest producers, including Russia and Mexico, agreed in late 2016 to curb oil production by 1.8 million B/D to reduce the supply glut that had sent prices plummeting and caused massive layoffs throughout the industry. Compliance was not only good, but better than expected. Some countries cut supply even more than they agreed, and Venezuelan output dropped sharply because of that country’s economic crisis, which brought the market back in balance. The production cuts totaled almost 2.5 million B/D, according to the International Energy Agency (IEA). The extent of the cuts has led some, including the IEA, to fear that the market could soon be in short supply, sending prices sharply higher, and continuing the cycle of sharp shocks to the market. To them, oil prices in the $60–70 bbl range would be ideal, encouraging new production to replace declining reserves without disrupting demand growth. The oil market has tightened quickly, which should lead to output increases from major producers this year and next. Common phrases in the industry this year are “cautious optimism” about prices and “capital discipline.” But oil price cyclicality appears inevitable. The long-term nature of the business that requires years to develop new production, along with reliance on lagging indicators and the relative price inelasticity of consumption, underlies the difficulty of balancing supply and demand. Since 2014, rebalancing the oil market has meant cutting production and reducing inventories; for the rest of this year and 2019, it will mean increasing supply to prevent prices from rising too quickly. One source of supply that may help is the Permian Basin, which has seen remarkable growth during the downturn, and could act as a swing producer and a major oil exporter. A new report from IHS Markit forecasts that Permian production will rise by almost 3 million B/D to 5.4 million B/D by 2023. Production from the Permian by itself would be greater than any OPEC country except Saudi Arabia and the additional output would be more than the production of Kuwait, the report said. Permian output was less than 1 million B/D in 2010. One thing that could derail this predicted increase is strains on infrastructure. Already, logistical bottlenecks in pipelines and trucking have occurred, causing some production to be deferred to next year.

ВЫЯВЛЕНИЕ ТРЕНД-СЕЗОННЫХ КОМПОНЕНТ ВО ВРЕМЕННЫХ РЯДАХ ЭКОНОМИЧЕСКИХ ПРОЦЕССОВ

Цель: Исследование тренд-сезонных экономических процессов на базе временных рядов, с последующей подготовкой данных для прогнозирования динамики развития с использованием методов прогнозирования как гибридных, так и методов нелинейной динамики. Обсуждение: В современных условиях экономики для минимизации рисков и потерь часто применяют прогнозирование на основе временных рядов. Одним из наиболее значимых факторов, которые необходимо учитывать на начальном этапе анализа данных временного ряда, является сезонность. В данной работе представлен алгоритм выявления сезонной компоненты Четверикова, проведена его апробация на основе эталонного ряда, и представлено исследование на выявление сезонной компоненты во временных рядах цен на нефть марки Brent, курса доллара к рублю и временного ряда оптовой продажи бутелированной питьевой воды в городах Краснодарского края. Результаты: метод Четверикова позволяет нам выделять сезонную компоненту во временных рядах с явно существующей зависимостью от времени года. Говорить о сезонности в таких временных рядах как цены на Brent и курс доллара достаточно сложно, так как на их значение большое влияние оказывают геополитические факторы, например, договоренности стран ОПЕК. Авторами планируется проведение дальнейшего исследования представленных в работе временных рядов для прогнозирования динамики развития процессов с использованием как гибридных методов, так и методов нелинейной динамики.

ESTIMATING THE IMPACT OF OIL RENTS ON THE ECONOMIC GROWTH OF THE OPEC COUNTRIES

This study aimed to know the effect of oil rents on the economic growth of in a panel of nine selected oil exporting countries by the panel integration for 1997 to 2015. Our findings suggest that there is one-way strong causality running from oil rents to GDPG and foreign direct investment. Also, the long run elasticity coefficient reveals that the 1% change in oil rents will change the GDP growth by 0.46%. The results of the coefficient (ECM) are -0.1459 meaning that system corrects its previous period disequilibrium at a speed of 14.5% annually to reach at the steady state. OPEC countries should pursue an integrated economic policy by diversifying sources of GDP and not relying solely on oil revenues because the latter is heavily affected by fluctuations in world oil prices and the exchange rate against local currencies. Article visualizations:

Crude or Refined? Rationality of Downstream Investment for OPEC Members

Should oil-rich countries aggressively move toward downstream and invest in the oil refinery industry? This is a crucial energy policy question for such economies. We offer theoretical models for a vertical integration strategy (i.e. downstream investment) within an oil-producing economy. The first model highlights the trade-off between return and risk-reduction features of upstream/downstream sectors. The dynamic model demonstrates the volatility of total budgetary revenue of each sector. We motivate the discussion in the context of OPEC countries. Our theory-guided empirical analysis shows that the average markup in the refining sector is significantly smaller than the profits in the upstream; thus, not much economic value-added can be expected through vertical integration. We, however, find that from a hedging prospective the more stable and mean-reverting refining margins may provide a partial revenue cushion when crude oil prices are low. The analysis can inform energy sector investment decisions as well as export diversification policies of oil producing countries.

Energy exports, globalization and economic growth: Evidence from OPEC countries

Energy exports, globalization and economic growth: Evidence from OPEC countries

Современное состояние мирового рынка нефти

The main issue of the world economy today is the global rise in oil prices. Oil remains the most important primary energy source in the world for the next 30-40 years. According to experts, by 2030 this figure will reach 116 million barrels per day. However, the share of OPEC countries in the world’s proven oil reserves is 83%. The world is facing the threat of a prolonged oil crisis and should be prepared for the fact that oil prices will be high for a long period.OPEC expects an increase in demand for gasoline and distillates in 2018 by almost 1 million barrels per day. The optimism of the cartel is based on the growing demand for petroleum products in the US and the increase in global car sales. The healthy growth of the world economy, good sales figures for cars in recent months and increased consumption in the US will lead to an increase in demand for gasoline and distillates in the world by 0.993 million barrels per day. This will have a positive impact on oil and oil products stocks, which OPEC and non-OPEC countries seek to reduce by limiting production. The main driver of the reduction in petroleum products OPEC sees consumption in the US. For the first time in past 25 years, the demand for diesel fuel and gasoline in the US increased by 846 thousand barrels per day. The reserves of gasoline and distillates in the US declined over in 2017 and fell below the average for five years. Oil reserves also fell below this indicator.Nowadays, OPEC continues to play a huge role in the functioning of the world economy, but it is clear that its role in the international arena is getting lower and lower every year. This is due to many indicators. Here are the main ones. First, due to the fact that already today OPEC is not able to cope with the fall in oil prices, it has to seek support from other oil-exporting countries, that is, its dependence on other countries increases. Secondly, the recent rationalization of the use of natural resources and the shift to the use of alternative energy sources, leads to a reduction in demand for oil. In these conditions, OPEC pursues a policy of reducing the production of oil. But, with the reduction in oil production in the OPEC countries, the states that are not included in it, on the contrary, are trying to increase production of «black gold», gradually reducing the role of OPEC in the functioning of the world economy.The dynamics of energy demand is affected by many factors, including weather, the price of petroleum products, the growth rate of the economy, etc. The proposal is also difficult to calculate. Despite the very specific goals of the OPEC + countries and other exporters, there are periodic accidents, spills, man-made and natural disasters that can dramatically change the market situation. Many risks have to be neglected. IEA, OPEC and the US Ministry of Energy regularly publish their estimates of the future oil market and are the most authoritative organizations in this regard.This article considers the dynamic of changes in the world market of «black gold», also many factors due to the influence of various geopolitical processes on extraction and export of oil.Key words: oil, price, OPEC, petroleum, barrel.

Environmental performance of OPEC countries: addressing the role of gross domestic product, energy consumption, trade openness and industrial structure

Based on the Kuznets's environmental theory, we examine the effect on carbon dioxide (CO2) emission of gross domestic product (GDP), energy consumption, trade openness, and industrial structure in OPEC countries during 1974-2013, using the Full Modified Ordinary Least Square (FMOLS) method. We find that GDP, energy consumption, and industrial structure have positive effects on CO2 emission. The GDP squared, however, negatively affects CO2, although the effect is small. The positive effect of GDP but negative effect of GDP squared validates the environmental Kuznets curve for OPEC countries. In addition, we find that an increase in trade openness leads to decrease in CO2 emission. Using the panel vector error correction model (VECM) and Granger causality test, we confirm that long-run causality is supported for all of our equations. We also find bi-directional short-run causality between energy consumption and CO2 emission and between energy consumption and industrial structure. Moreover, we find one-way causality running from energy consumption to GDP, from CO2 emission to trade openness, from GDP to trade openness, and from GDP to emission.

Power consumption analysis on large-sized electric bus

The increase of greenhouse gasses effect is one of the causes of climate change. The use of vehicles with fossil fuels is one of the contributors to pollution and global warming. Another reason why dependence on it should be reduced is the lack of Indonesia's petroleum reserves compared to other OPEC countries. Researchers are trying to anticipate this by developing electric vehicles capable of operating without pollution. Implementation of electric vehicles has begun with the electric train, tram, electric bus, and others. Vehicles with rails get electricity supplies from the grid along the tracks, but the type of freely moving vehicle without a rail requires another way to get electricity supplies. Electric vehicles with power storage (battery) have an advantage in the roaming area if supported by proper recharging techniques. In electric vehicles, the battery is recharged by the direct charging process or swapped with other one (swapping). If the vehicle has high mobility, such as public transport (bus) then the shortest charging time may be very important.

Environmental performance of OPEC countries: addressing the role of gross domestic product, energy consumption, trade openness and industrial structure

Environmental performance of OPEC countries: addressing the role of gross domestic product, energy consumption, trade openness and industrial structure

СПОТОВЫЙ РЫНОК ДЛЯ ИРАКСКОЙ НЕФТИ И ПЕРСПЕКТИВЫ ТРАНСФОРМАЦИИ ЦЕНООБРАЗОВАНИЯ НА СЫРУЮ НЕФТЬ

The article analyses perspectives for developing a new spot market for Iraqi oil in the context of the sharpening competition of oil-exporters for export niches. Since opening of its oil sector to foreign capital and technology in 2009/2010 Iraq has firmly established itself as an important supplier of oil to European, Asia-Pacific and even US markets. In the present mechanism of crude oil price-setting Iraq is forced to adjust its oil export prices to the benchmarks established by more powerful market players. Meanwhile, the produced volumes of both Iraqi brands – Basra Light and Basra Heavy – are sufficient for launching a sustainable spot trade. The spot market will allow exporters of Iraqi oil to build long lasting partnerships with its buyers, e. g. refining plants in Europe and Asia-Pacific. Besides, the liquid and transparent spot prices will help the central authorities of Iraq to impose a discipline on the oil export which presently is in a chaotic stance. The spot market is promoted by a cooperation between the State Oil Marketing Organization and the Swiss trading arm of the Russian oil company Lukoil. Transfer of Iraqi oil exports to spot could trigger major adjustment or, possibly, even dismantling of the current institute of the official selling price presently used by OPEC countries. It is highly probable that in the medium term perspective new transparent and liquid spot market, localized in The Dubai International Financial Centre, will be integrated into the financial market. Eventually, this will lead to a structural strengthening of the world oil market.

Oil, Hard Power and U.S. Hegemony

In late 2014 and early 2015, the United States dramatically increased its presence in the oil market. This tremendous increase in production, which placed the United States ahead of every OPEC country besides Saudi Arabia, caused a global change in supply and demand that dropped the price of crude oil to $58 per barrel. This translated to an average gasoline price of $2.55 per gallon nationally on Dec. 15, 2014. The price drop reverberated throughout the global economy, affecting countries from Malaysia to Norway. In Venezuela, for example, it is estimated that a one dollar drop in the price of oil will cost the country approximately $770 million in annual revenue. The United States’ decision to act influenced the entire world, and this is no surprise – economic control is just one of the many facets of hard power and hegemony.

Market Share or High Oil Prices? The Myths About OPEC

OPEC countries represent about 35% of the total global oil production and 80% of the proven oil reserves. Although the importance of OPEC has been decreasing since the first oil shock of 1973-74, it is still the most important organisation in the market of oil, which nowadays depends on supply and demand. However, there are a lot of myths surrounding OPEC and most analysts just assume that the organisation is a typical cartel and that its decision-making process and is based on unity of action among the member states.

Oil consumption subsidy removal in OPEC and other Non-OECD countries: Oil market impacts and welfare effects

This paper studies the oil market effects of phasing out oil consumption subsidies in the transport sector. Welfare effects in different countries are also examined. The paper further investigates potential feedback mechanisms of oil subsidy removal via lower oil prices in the global oil market, which may stimulate oil consumption in other regions. An intertemporal numerical model of the international oil market is applied, where OPEC-Core producers have market power. The major subsidisers of oil are OPEC countries, and the effects of subsidy removal here are quite pronounced. Consumption of oil in the transport sector of OPEC countries declines significantly. As a result, the global oil price falls slightly, and other regions increase their oil consumption to some degree. Although OPEC consumers are worse off by the subsidy removal, total welfare in OPEC increases due to higher profits from oil production.

On quota violations of OPEC members

Over the last decades quota violations have become a norm for OPEC countries. However, the academic literature on OPEC focuses more on its production behavior than on analyzing the quota allocation process or characterizing quota violation patterns. This paper offers a theoretical model with empirical evidence to explain OPEC members' incentives for abiding or violating quotas. We first offer a cartel model with a quota allocation rule and an endogenous capacity choice. The model highlights the trade-off between building spare capacity to bargain for a higher legitimate quota versus risking quota violation punishment. Using the quarterly data from 1995 to 2007, we empirically support the main results and intuitions for the model. Our empirical evidence is consistent with a theoretical framing in which capacity constraints work as an enforcement mechanism in good times and OPEC's quota system disciplining its members in bad times.

Колебания цен на нефть в странах ОПЕК и влияние на мировой рынок нефти

Колебания цен на нефть в странах ОПЕК и влияние на мировой рынок нефти

Re-visiting the renewable energy–economic growth nexus

PurposeThis paper aims to investigate the dynamic relationship between renewable energy and economic growth in African OPEC member countries (Angola, Algeria and Nigeria).Design/methodology/approachThe fully modified ordinary least squares technique for heterogeneous cointegrated panels (Pedroni, 2000) is used to estimate the parameters of the model.FindingsThe study revealed four main findings. First, there is a bidirectional causality between renewable energy and economic growth in the long and the short run. Second, a bidirectional causality exists between non-renewable energy and economic growth in the short and long run. Third, a bidirectional causality exists between CO2 emissions and economic growth. Fourth, a unidirectional causality was also found between CO2 emissions and non-renewable energy consumption with the direction of causality stemming from the consumption of non-renewable energy to CO2 emissions.Practical implicationsBecause renewable consumption enhances growth, OPEC-member Africa countries should encourage investment in modern renewable sources that has high conversion efficiency such as solar, wind and hydro to strengthen their response to mitigating the impacts of climate change.Originality/valueThis study applies multiple methods to analyze the relationship between renewable energy and economic growth in African OPEC countries.