Organization Of The Petroleum Exporting Countries Research Articles

Resource curse in OPEC with varied levels of financial regulations and constraints: The role of oil price shocks and digital finance

Economic growth and development are crucial for global economies, and a nation's physical, human, and natural resources significantly impact its trajectory. Natural resource-rich nations can benefit or face the resource curse. Henceforth, this study examines the economic growth of Organization of the Petroleum Exporting Countries (OPEC), considering digital finance, financial regulations, and oil price shocks. Understanding the intricate relationship between oil price fluctuations and digital finance within diverse financial regulatory frameworks is essential for a comprehensive grasp of the resource curse in OPEC. The research employed a bias-corrected dynamic panel and MMQR model to analyze datasets from 2004 to 2022. The study reveals that Oil price shocks have led to higher economic growth when there are moderate financial constraints. However, they have a detrimental effect when the financial system is either very constrained or highly unconstrained. Digital finance has been shown to enhance Gross Domestic Product (GDP) across various levels of financial regulations. The GDP of OPEC experiences a significant adverse effect when digital finance and oil price shocks are coupled, particularly in the presence of stringent financial rules. This outcome is mainly attributed to the adverse influence of oil prices. The findings above underscore the need for moderate levels of financial regulations that support the favorable influence of oil prices and digital finance on GDP. The study additionally suggests a prospective strategy for enhancing GDP growth in OPEC nations: facilitating digital finance.

Analysis of Crude Oil Market Volatility and Macroeconomic Conditions: Empirical Evidence from Nigeria

This study aims to investigate the relationship between the volatility of the crude oil market and the macroeconomic conditions in Nigeria. The author used the methods of the auto-regressive distributed lag (ARDL) model in conjunction with the generalized autoregressive conditional heteroscedasticity (GARCH) to determine the extent of volatility using a monthly dataset from January 2012 to December 2022. The author regressed the crude oil price volatility index on Organization of the Petroleum Exporting Countries (OPEC) production quotas, conflicts, GDP growth rate, exchange rate and inflation. The results indicate that oil price volatility relates negatively to GDP, implying that the volatility of crude oil prices dampens growth in Nigeria. The paper concludes that rising oil prices heighten inflation, depreciate the exchange rate and depress growth in Nigeria. To hedge against oil price volatility, the paper recommends that the Nigerian government adopt policy measures that would increase energy efficiency and reduce the country’s dependency on oil exports through diversification in other related productive sectors such as agriculture and manufacturing.

Reasons Behind Words: OPEC Narratives and the Oil Market

We analyze the content of the Organization of the Petroleum Exporting Countries(OPEC) communications and whether it provides information to the crude oil market. To this end, we derive an empirical strategy which allows us to measure OPEC’s public signal and test whether market participants find it credible. Using Structural Topic Models, we analyze OPEC narratives and identify several topics related to fundamental factors, such as demand, supply, and speculative activity in the crude oil market. Importantly, we find that OPEC communication reduces oil price volatility and prompts market participants to rebalance their positions. Our analysis indicates that market participants assess OPEC communications as providing an important signal to the crude oil market.

Analysis of the relationship between the profitability of market portfolios and the profitability of shares of companies in the oil sector

Purpose: This article aims to elucidate whether the particularity of the high level of explanation of the relationship between the return on the market and the return on shares of companies in the oil sector in Brazil occurs similarly in other markets.
 Methodology: The oil companies considered were listed as the main ones by Forbes, Fortune and Exame magazines. Their shares and market movement were obtained from their respective host countries stock exchanges, and other information on institutional websites (e.g: OPEC - Organization of the Petroleum Exporting Countries). As theoretical support, CAPM and APT metrics were applied between from January 2, 2015, to March 31, 2021.
 Results: Considering the privileged position of the fuel sector for the movement of the level of economic activity of the countries, the result of this research confirmed that the particularity of the Brazilian scenario is observed in other countries with regard to the high level of explanation of the return of the superior market portfolio at 50%. The research observed that the Explanation Coefficient tends to capture in a more significant way the effects of crises that come from local economic contexts and impacts on the world economy, such as a possible reduction in the level of gross domestic product of countries such as the United States or China. As for the unexpected event, such as Covid-19, the model, in principle, did not present the same result, which could be observed in the quarterly analyses.
 Contributions of the Study: Research can help managers and investors, as by demonstrating similarities one can predict future events or assist in decision-making.

Testing the resources curse hypothesis: Unleashing the role of national governance and financial development in OPEC countries

Financial development is an inclusive objective for economies worldwide, but its connection with natural resources remains a topic of debate. This study aims to address this gap by investigating the impact of the resource-curse hypothesis on economic development in Organization of the Petroleum Exporting Countries (OPEC) countries during the period 1996 to 2021, given their substantial natural resources. Employing a cross-sectional ARDL (CS-ARDL) framework and validating the cointegration results with the Pedroni, Westerlund, and Kao Co-integration tests, this research surprisingly challenges the conventional wisdom of the resource-curse hypothesis. Instead, it reveals that natural resource rents can be beneficial for promoting financial development in high-income resource-rich economies. Furthermore, the study uncovers positive associations between financial development and key factors such as government effectiveness, regulatory quality, renewable energy adoption, economic growth, and urbanization. The findings underscore the significance of strong institutional frameworks in fostering financial development and offer valuable policy recommendations to enhance financial progress in OPEC countries.

Can U.S. strategic petroleum reserves calm a tight market exacerbated by the Russia–Ukraine conflict?

Recent changes in global petroleum markets have driven the debate regarding the use of strategic petroleum reserves (SPRs) as a price management tool during periods marked by extreme price volatility. We examine the price management role of the U.S. SPR under typical market conditions and in extreme emergencies. Furthermore, we discuss the White House's hypotheses that (a) boosted Organization of the Petroleum Exporting Countries' (OPEC) production and releases from the U.S. SPR result in a negative pressure on U.S. gasoline inflation, and (b) crude oil releases from the U.S. SPR helps balance the global oil market. The threshold cointegration results indicate that U.S. SPR releases impact neither OPEC production nor imported input prices. We apply a hybrid open-economy Phillips curve to model gasoline inflation, accounting for backward- and forward-looking price settings, domestic and global slackness, and energy security. We distinguish between normal-, super-, and hyper-backwardation and -contango oil markets using threshold cointegration and regression techniques. Our results demonstrate that SPR releases and OPEC output increases generally decrease inflation, with a crucial exception being the hyper-backwardation market, as seen in 2021–2022. This period was characterized by severely constrained global supply buffers, including OPEC's spare capacity, exacerbated by the Russia–Ukraine conflict. For this period, we conclude that (1) the impact of OPEC production changes on gasoline inflation would be negligible, (2) excess domestic demand relative to domestic supply raises concerns about domestic energy security, and (3) the unprecedentedly large SPR drawdowns are likely to have caused the market to panic and contributed to gasoline price increases, contrary to arguments suggesting that the 2022 releases eased domestic gasoline prices. We conclude that the SPR is an ineffective price control mechanism during crises and may not have the strategic value previously thought in an extremely tight oil market.

Global Crude Oil Price, Oil Revenue and Economic Performance: Dutch Disease Hypothesis

The purpose of this paper is to give a general understanding of the global crude oil price, oil revenue and economic performance vis-à-vis Dutch disease proposition. This work explores the relationship between the price of crude oil and its oil revenue generation on the regions of the Organization of the Petroleum Exporting Countries (OPEC) and non-Organization of the Petroleum Exporting Countries (non-OPEC). The crude oil price has recently been ?uctuating greatly that it cannot be predicted; this ?uctuation causes changes in the oil revenues, thus affecting the economy worldwide. To better understand the factors that affect the crude oil price, this study examined West Texas Intermediate (WTI), Brent, Dubai oil and OPEC oil prices whether the Global oil fluctuation in these countries have a signi?cant effect on the ?uctuation of Oil revenues. Various studies have con?rmed the importance of crude oil prices to the global economy. This study focuses on the relationship between crude oil prices and oil revenue levels. However, therefore, in addition to the in-depth understanding of the relationship between oil prices and oil revenues, the relationship other variables and oil prices is valuable and worthwhile topic to explore. The findings of the studies reviewed revealed that the agriculture sector, manufacturing and telecommunication sector exerted a positive and significant impact on Nigerian economic performance and diversification dwindling oil revenue should be invested heavily on productive non-tradeable sector according to Dutch diseases hypothesis (Riti et al., 2016).

Unveiling the impact of geopolitical conflict on oil prices: A case study of the Russia-Ukraine War and its channels

The Russia-Ukraine War, which has lasted for over a year, has been proven to significantly impact crude oil prices. This article aims to explore the channels through which the Russia-Ukraine War affects crude oil prices and to assist decision-makers in channel intervention to mitigate the impact of the war. To this end, the study proposes a research method called “Compare Real Data with Predicted Data and Match Influencing Factors” (CRP-MIF). The method reveals that the Russia-Ukraine War, through its impact on speculative activities, inventory, and supply-demand balance, combined with production announcements of Organization of the Petroleum Exporting Countries (OPEC), led to sharp short-term fluctuations in international oil prices and rapid price increases. Among these channels, speculative activities, inventory, and supply have a substantial impact. Relevant entities can weaken the impact of the war on oil prices and macroeconomic factors by intervening in these transmission channels. This study provides a new reference paradigm for studying the impact channels of major crisis events on commodity prices.

Derivatives Accident: The Crude Oil Treasure Incident Research

The price of the WTI2005 crude oil futures contract was concluded at -37.63 US dollars per barrel on April 20 at US Eastern Time. This is the first negative price of WTI crude oil since it was listed on the Chicago Stock Exchange, causing vast losses to the Bank of China and crude oil treasure investors. In order to avoid similar accidents in the future, both internal and external risks need to be evaluated. The Bank of China is primarily accountable for the accident as the seller of the crude oil treasure due to its blatant incompetence in regard to the company's products, sales, risks, disclosure, supervision, and internal controls. However, external factors including COVID-19, the Organization of the Petroleum Exporting Countries, the CME Clearing, as well as regulators and consumers of crude oil treasure actually have some obligations thereby providing suggestions to banks, regulators, and investors. This study is vital for the use and regulation of derivatives in light of the rapidly expanding and developing financial sector in China.

Energy as a weapon of war: Lessons from 50 years of energy interdependence

AbstractThe Organization of the Petroleum‐Exporting Countries (OPEC) used oil as a weapon against Western countries supporting Israel in the 1973 Yom Kippur War. From 2021, Russia used a similar strategy of restricting gas flows to Europe, while Europe later reduced Russia's market access. In these cases, there was economic and political damage. These examples show that energy is a weapon used to pressure sovereign states. Energy is a multidimensional resource that reflects broader ties within the political‐economic system of international relations. This comparative study identifies four components that enable energy as a weapon: interdependence, energy security, neoliberal economics and sovereignty. Four key policy lessons emerge to improve energy security: (1) determine the acceptable limits of energy dependence, (2) acknowledge institutions and markets cannot deliver energy security outside their design parameters, (3) energy security requires addressing the entire value chain, and (4) energy is a weapon that threatens state sovereignty. The collapse of the gas trade between Russia and the EU creates instability and removes the pillar of interdependency; this now ushers in a new era.

Does financial and economic expansion allow for environmental sustainability? Fresh insights from a new composite index and PSTR analysis

Despite the use of different environmental proxies, the economic and financial development (FD)-environmental quality (EQ) nexus is still enigmatic. In this regard, a new composite environmental quality index (CEQI) is used to holistically represent EQ. Moreover, the Panel Smooth Transition Regression (PSTR) method is applied to estimate the Environmental Kuznets Curve (EKC) and the financial development Kuznets Curve (FKC) hypotheses using data from 13 members of the Organization of the Petroleum Exporting Countries (OPEC). The findings reveal that economic growth in the first regime positively affects CEQI while having a negative effect after exceeding the threshold and entering the second regime. Also, FD positively affects CEQI for the first regime and has a negative influence for the second regime. Other factors such as energy consumption and composite trade share (CTS) in both the first and second regimes have a negative effect on CEQI. Accordingly, several environmental quality-improving policies are recommended.

Behind OPEC’s Invitation for Indonesia to Rejoin: An Analysis of Membership Dynamics in an International Organization

The membership structure matters to ensure a durable negotiating forum in an international organization. However, in July 2017, Saudi Arabia and the United Arab Emirates, on behalf of the Organization of the Petroleum Exporting Countries (OPEC), requested Indonesia to reactivate its membership, which the country had suspended—for the second time—in November 2016. The first suspension was in January 2009—annulled in January 2016. The Government of Indonesia (GoI) then welcomed the invitation. This study aims to analyze OPEC’s membership scheme, which has given leeway to its members to send a request like the above. In-depth interviews were conducted with Indonesia’s representatives in OPEC to capture the organization’s internal condition. By analyzing the organization’s membership dynamics, we can identify three reasons behind Indonesia’s invitation to rejoin. The first is because OPEC’s country members need Indonesia’s presence in negotiations as they consider Indonesia neutral. Second, OPEC needs a country with a different attribute to strengthen the organization’s image of diversity on the international stage. The third reason is the historical elements. OPEC strives to maintain historically good relations with the GoI as the country has contributed to the organization’s development. For those reasons, an international organization might reinvite its former member to join the group.

Does industrialization trigger carbon emissions through energy consumption? Evidence from OPEC countries and high industrialised countries

<abstract> <p>This study investigated the effect of Industrialization on carbon emissions through energy consumption for a panel of eight Organization of the Petroleum Exporting Countries (OPEC) and nine High Industrialised Countries over the period 1985 to 2020; the study employs the first generation and second-generation Unit root tests. The study further adopts the use of the Panel Autoregressive Distributed Lag Model, and Common Correlated Effect pooled mean group to estimate the parameters of the model for OPEC countries and High Industrialised Countries, respectively. In addition, the Dumitrescu-Hurlin Granger causality test is conducted to infer the direction of causality among the variables. The causality test result reveals that, in OPEC, energy consumed during industrial activity is not enough to cause carbon emission and carbon emission does not cause industrialisation to interact with energy consumption. Also, for highly industrialised countries, interaction of energy consumption and industrialization causes carbon emission, but carbon emission does not cause the interaction of energy consumption and industrialization. The estimated model shows that the interactive effect of Industrialization and energy consumption has no significant influence on carbon emissions in OPEC countries in the short and long run. In contrast, foreign direct investment and economic growth have a positive and significant effect on carbon emissions in the short run. However, for highly industrialised countries the study found that the interactive effect of energy industrialization and energy consumption has a positive and significant effect on carbon emissions in the short run. It is apparent from the study that energy consumption for industrial activities, particularly in highly industrialised countries, causes carbon emission and such policy makers should formulate policy that necessitate the use of green energy for industrial activities to improve environmental quality.</p> </abstract>

A Deep Learning Ensemble Method for Forecasting Daily Crude Oil Price Based on Snapshot Ensemble of Transformer Model

The oil industries are an important part of a country’s economy. The crude oil’s price is influenced by a wide range of variables. Therefore, how accurately can countries predict its behavior and what predictors to employ are two main questions. In this view, we propose utilizing deep learning and ensemble learning techniques to boost crude oil’s price forecasting performance. The suggested method is based on a deep learning snapshot ensemble method of the Transformer model. To examine the superiority of the proposed model, this paper compares the proposed deep learning ensemble model against different machine learning and statistical models for daily Organization of the Petroleum Exporting Countries (OPEC) oil price forecasting. Experimental results demonstrated the outperformance of the proposed method over statistical and machine learning methods. More precisely, the proposed snapshot ensemble of Transformer method achieved relative improvement in the forecasting performance compared to autoregressive integrated moving average ARIMA (1,1,1), ARIMA (0,1,1), autoregressive moving average (ARMA) (0,1), vector autoregression (VAR), random walk (RW), support vector machine (SVM), and random forests (RF) models by 99.94%, 99.62%, 99.87%, 99.65%, 7.55%, 98.38%, and 99.35%, respectively, according to mean square error metric.

Oil-supply news and dynamics of exchange rates in oil-exporting countries

Most sub-Saharan African (SSA) countries have benefited and also suffered from the consequences of oil price fluctuations. The suffering of these nations has reverberated especially from the influencing power of exchange rate volatility, high inflation as well as an adverse impact on other macroeconomic variables. Therefore, this study estimated the magnitude of the effects of oil supply news shocks on the dynamics of exchange rates and also, the impact of exchange rate dynamics on oil supply news shocks in oil-exporting countries of West Africa (WA) countries. We implemented a panel non-linear autoregressive distributed lag (P-NARDL) model. The finding of the study indicates that rising fluctuations in oil prices caused by Organization of the Petroleum Exporting Countries (OPEC) news of oil supply disruption significantly induce exchange rate devaluation. Unambiguously, a 1 percent increase in oil supply news shocks stimulated 1.59432 percent appreciation while the same-size decrease in oil prices led to 0.86397 percent devaluation. These validate asymmetrical presence in exchange rate behaviour concerning the oil market. Also, we found 1.09452 percent devaluation and 0.25371 percent appreciation in the exchange rates of oil-producing African nations following a 1 percent rise and fall in inflation rates indicating a symmetric relationship between inflation rate and exchange rates. Oil-producing countries of WA should utilize foreign exchange (FX) from oil export to acquire capital-intensive projects.

Empirical relationship between creativity and carbon intensity: a case of OPEC countries.

This article attempts to examine the role of creativity on carbon intensity in case of Organization of the Petroleum Exporting Countries (OPEC) countries. The panel estimation techniques are used for annual data for the period of 1990-2018. The empirical evidence affirms that patent rights and innovation act as a policy factor in controlling carbon intensity, i.e. creativity leads to energy-efficient and environment friendly society. However, innovations have higher magnitude compared to patent. Contrarily, urbanization and economic growth are the key determinants in enhancing carbon intensity, while renewable energy has insignificant impact on carbon intensity. The empirical analysis, especially for creativity, can add practical implications for related authorities in controlling carbon intensity and improving energy efficiency.

Determinants of economic growth: Panel data analysis of OPEC

The article deals with the study of the determinants of economic growth of the Organization of the Petroleum Exporting Countries (OPEC), which are all developing countries. The issue is examined because the organization affects the price of oil worldwide. Panel data analysis with the random effects model is used. The panel data analysis examines the relationship between GDP and the selected determinants from 1980 to 2019. The analysed data are non-standard. They are affected by volatility, missing values, and credibility. For example, countries such as Venezuela, Iran, or Iraq may provide data which can distort the analysis. The results show a correlation of a total of five variables. The correlation has both positive and negative effects on GDP. Daily oil production, oil exports and oil prices positively affect GDP, contributing to GDP growth. Unemployment and exchange rate have a negative effect. No correlation was found between inflation, population growth, oil demand, and GDP. The analysis can be used as a basis for future decision-making by OPEC Member economies.

Relationship between crude oil price and production levels—An empirical study of OPEC and non-OPEC states

This work explores the relationship between the price of crude oil and its production through an empirical study on the regions of the Organization of the Petroleum Exporting Countries (OPEC) and non-Organization of the Petroleum Exporting Countries (non-OPEC). The crude oil price has recently been fluctuating greatly that it cannot be predicted; this fluctuation causes changes in the prices of raw materials for everyday life, thus affecting the economy worldwide. To better understand the factors that affect the crude oil price, this study gathered monthly oil production by OPEC and non-OPEC members, which are divided into the regions of Europe, America, and Asia according to the U.S. Energy Information Administration (2015). Data on the West Texas Intermediate (WTI), Brent, and Dubai oil prices in the period from January 1995 to November 2015 were also gathered and subjected to unbalanced panel random effect regression to investigate the relationship between crude oil price and oil production and to determine whether the oil production by these countries have a significant effect on the fluctuation of crude oil price. This study explored the relationship between production and price, specifically that of crude oil. Hence, it investigated whether and how the changes in monthly crude oil production by OPEC and non-OPEC members in Europe, America, and Asia have affected the changes in three major crude oil prices, namely, WTI, Brent, and Dubai, in the following terms.

Has the fall in oil prices shifted the healthcare spending burden from the Organization of the Petroleum Exporting Countries’ governments onto private spending?

Has the fall in oil prices shifted the healthcare spending burden from the Organization of the Petroleum Exporting Countries’ governments onto private spending?

Renewable energy, nonrenewable energy, and environmental quality nexus: An investigation of the N-shaped Environmental Kuznets Curve based on six environmental indicators

The current research evaluated the role of non-renewable and renewable energy consumption in environmental sustainability following the N-shaped Environmental Kuznets Curve framework controlling financial development, population density, and composite trade share. Unlike previous studies, this research used six indices to depict environmental deterioration and environmental quality. More precisely, pressures on nature, ecological footprints, environmental vulnerability, and adjusted net saving are employed to represent environmental deterioration, while environmental performances and environmental sustainability are adopted to proxy environmental quality. The Dynamic Seemingly Unrelated Regression Equations were used on panel data from 1994 to 2019 in the selected Organization of the Petroleum Exporting Countries. The findings revealed the N-shaped linkage between per capita income and environmental deterioration indicators, such as ecological footprints, adjusted net saving, pressures on nature, and environmental vulnerability. Regarding the linkage between environmental quality indicators, including environmental performances and environmental sustainability, and per capita income, an inverted N-shaped Environmental Kuznets Curve is verified. Considering all six environmental indicators, non-renewable energy tends to deteriorate the environment, while the use of renewable energy promotes environmental quality. Moreover, population density, financial development, and composite trade share raise environmental deterioration. The results are vital for achieving a green economy with better environmental quality.