Oil Prices Research Articles

Drilling Deeper: Non-Linear, Non-Parametric Natural Gas Price and Volatility Forecasting

This paper studies the forecast accuracy and explainability of a battery of dayahead (Henry Hub and Title Transfer Facility (TTF)) natural gas price and volatility models. The results demonstrate the dominance of non-linear, non-parametric models with deep structure relative to various competing model specifications. By employing the explainable artificial intelligence (XAI) approach, we document that the price of natural gas is formed strategically based on crude oil and electricity prices. While the conditional volatility of natural gas returns is driven by long-memory dynamics and crude oil volatility, the informativeness of the electricity predictor has improved over the most recent volatile time period. Although we reveal that predictive non-linear relationships are inherently complex and time-varying, our findings in general support the notion that natural gas, crude oil and electricity are interconnected. Focusing on the periods when markets experienced sharp structural breaks and extreme volatility (e.g., the COVID-19 pandemic and the Russia-Ukraine conflict), we show that deep learning models provide better adaptability and lead to significantly more accurate forecast performance.

Inflation forecasting in turbulent times

AbstractIn the recent years many countries were hit by a series of macroeconomic shocks, most notably as a consequence of the COVID-19 pandemic and Russia’s invasion in Ukraine, raising inflation rates to multi-decade highs and suspending well-documented macroeconomic relationships. To capture these tail events, we propose a mixed-frequency Bayesian vector autoregressive (BVAR) model with Student t-distributed innovations or with stochastic volatility. Whereas inflation, industrial production, as well as oil and gas prices are available at monthly frequencies, real gross domestic product (GDP) is observed at a quarterly frequency. Thus, we apply a mixed-frequency setup using the forward-filtering–backward-sampling algorithm to generate monthly real GDP growth rates. We forecast inflation in those euro area countries that extensively import energy from Russia and therefore have been heavily exposed to the recent oil and gas price shocks. To measure the forecast performance of the mixed-frequency BVAR model, we compare our inflation forecasts with those generated by a battery of competing inflation forecasting models. The proposed BVAR models dominate the competition for all countries in terms of the log predictive density score.

Oil market responses to Sino–European political relation shock: Insights after China's world trade organization accession

We investigate how changes in political relations between Europe and China affect the oil market. When political relations improve, we find a significant increase in oil demand and prices, accompanied by a decrease in market uncertainty. However, the effects on oil supply and inventory are minimal. Additionally, we compute the forecast error variance decomposition and construct the counterfactual evolution of oil variables in the absence of the impacts of political relation shocks. We find that shifts in Sino–European political relations contribute more significantly to variations in oil market uncertainty than to other oil variables. Finally, we augment the vector autoregression model by incorporating the Sino–US political relationship index. Our findings reveal that this augmentation significantly changes the impacts.

Impact of crude oil price innovations on global stock market volatility: Evidence across time and space

This study investigates the impact of crude oil price innovations on global stock market volatility through a ripple-spreading network model, incorporating four dimensions of crude oil price changes: realized volatility, implied volatility, variance risk premium, and realized skewness volatility. Additionally, we assess the effects of three types of crude oil shocks—oil-specific, aggregate demand, and oil supply shocks. The results indicate that while all four dimensions exhibit similar temporal diffusion patterns, their spatial impacts differ. Global stock markets demonstrate heightened sensitivity to implied volatility and variance risk premium, followed by realized volatility and, lastly, realized skewness volatility. Moreover, we find that realized volatility spreads through multiple transmission pathways, albeit at a slower pace compared to implied volatility and the variance risk premium. Among the crude oil shocks, oil-specific shock induces the most rapid volatility transmission across global markets, with aggregate demand shock following and oil supply shock exerting the smallest influence.

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.

The interplay of geopolitics and agricultural commodity prices

AbstractThis article uses the time‐varying parameter vector autoregressive model to assess the impact of geopolitical risk and shocks on agricultural commodity markets, accounting for demand—exports; supply—input prices; inventory; speculation; and economic fluctuations. The results show that geopolitical risks significantly impact corn and soybean futures prices and market behaviors with context‐specific implications in the short to medium term. In addition, heightened geopolitical risk during the Russia–Ukraine war increased oil prices and indirectly elevated agricultural commodity prices. These insights are crucial for agricultural risk management, informing federal policies and forecasting future price trends in an increasingly uncertain global market environment.

Oil price shocks, sustainability index, and green bond market spillovers and connectedness during bear and bull market conditions

This study examines the spillover dynamics and interconnectedness amongst sustainability indices, green bond markets, and oil price shocks. Using data from June 2013 to February 2023, this study employs spillover index methodology to analyze the transmission of shocks and volatility. The findings reveal that there is time-varying connectedness between all variables, which evidences a significant boost during times of crisis and extreme circumstances. Furthermore, the North American and US sustainability indices, along with the SP500 Environmental, Social, and Governance (SP_ESG) index, act as significant transmitters of shocks and volatility to other markets under different market conditions. Conversely, the Asia-Pacific, emerging market, and European sustainability indices, along with the green bond index, have emerged as net volatility receivers. Additionally, the study highlights the role of oil risk shocks as a transmitter of volatility under normal and bullish market statuses, while becoming a receiver in the lower quantile. These results have noteworthy implications for understanding the interdependencies and risks within financial markets and provide insights for investors, policymakers, and market participants.

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.

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 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.

Echoes of Conflict: Unveiling the Interconnected Tapestry of Russia-Ukraine Warfare, Oil Price Ballet, and the Asian Stock Symphony

The purpose of this research is to look into the impact of the Russia-Ukraine war on the relationship between oil prices and the Asian stock market. While earlier studies have investigated the impact of oil prices on stock markets, there has been little research into the impact of crude oil prices on the Asian stock market in the context of the Russia-Ukraine war. For this purpose, the data is collected from NSE and Bloomberg database the study's findings imply that the Russia-Ukraine war has had a major impact on the relationship between crude oil prices and stock market indices in numerous Asia-Pacific countries. The study suffers from a few limitations such as it only examines the relationship between crude oil prices and stock market indices but there are other macroeconomic factors, such as interest rates, inflation, and political instability which also affect the market.

Comprehensive evaluation of CCUS technology: A case study of China's first million-tonne CCUS-EOR project

CCUS, an emerging technology for reducing carbon emission, plays a crucial role in achieving the goal of carbon neutrality. CCUS technology exemplified by CO2 enhanced oil recovery (EOR) is gradually progressing from project demonstration to large-scale application. However, the commercial application still faces uncertainties in economic cost, energy efficiency and environmental benefits. This paper takes China's first million-tonne CCUS-EOR project (Qilu Petrochemical-Shengli Oilfield CCUS-EOR project) as an example, and establishes a comprehensive research framework for evaluating CCUS from the three dimensions of energy, environment, and economy, based on economic viability, energy input-output analysis, and carbon input-output analysis. The results demonstrate that during the project lifecycle, when the average oil price is $90/bbl, the project's NPV is $56.09 million, the project's IRR is 13.4 %, the payback period is 8.34 years, and the threshold oil price for the project to be economically profitable is $81.52/bbl. Furthermore, the Energy Return on Investment (EROI) of the project is 9.09, which considerably superior to that of the Shengli Oilfield's non-EOR, and the net energy output is approximately 18,472.57 kilobarrels. The Carbon Return on Investment (CROI) of the project is 4.12, with significant environmental benefits, and the cumulative net carbon emission reduction is approximately 8078.55 kilotonnes. Furthermore, the trends in EROI and CROI of the CCUS-EOR project demonstrate nearly opposite trajectories. The variation trends in EROI emerge N-shaped curve, while that of CROI emerge S-shaped curve. In summary, the Qilu Petrochemical-Shengli Oilfield CCUS-EOR project exhibits notable advantages in terms of energy efficiency and environmental benefits. However, the threshold oil price for triggering economic profitability is relatively high, which may pose certain economic risks to investors during periods of low oil price.

Negative crude oil prices: Supply chain disruptions and strategic lessons

Negative crude oil prices: Supply chain disruptions and strategic lessons

Impact of oil price volatility on economic growth in united states: an ordinary least square analysis

Impact of oil price volatility on economic growth in united states: an ordinary least square analysis

The Impact of the Last Two Presidential Periods on the Performance of the Indonesia Stock Exchanges: An Approach of Arbitrage Pricing Theory

This study aims to examine the influence of economic and non-economic macro factors on the performance of the Indonesia Stock Exchange (IDX) and the differences in their effects on the last two presidential terms using the Arbitrage Pricing Theory (APT) approach. The macro factors studied are an aggregate of 41 indicators of stock market index returns, benchmark interest rates, exchange rates, economic stability indicators, commodity prices, and corruption perception index (CPI). For the process of aggregation and identification of macro factors, this study uses Principal Component Analysis (PCA). The population studied were publicly listed companies on the IDX since October 2004 (299 companies) with a sample size of 157 companies. The observation period is 205 months: 120 months of the presidency of Susilo Bambang Yudhoyono (SBY) and 85 months of the presidency of Joko Widodo (JKW). The research design used the explanatory study method. The research model was analyzed using panel data regression. The results identified seven macro factor aggregates from 41 indicators studied: global index, macro economy, world oil prices, China index, Arabia index, inflation, and competitive resources. There was a simultaneous effect of macro factors on stock performance during the presidency of SBY and JKW. Partially, stock returns during the SBY era were positively influenced by the global index, world oil prices, the China index, the Arabian index, and inflation and negatively influenced by the macroeconomy. Meanwhile, during the JKW period, returns were positively influenced by the global, China, and Arabia indexes and inflation.

Temporal Volatility of Brent Oil Prices and Interrelation With Maritime Traffic Density in the Turkish Straits During COVID-19 Crisis

This research evaluated variations in Brent oil prices and the interrelation with maritime traffic density in the Turkish Straits during the COVID-19 pandemic. The number of commercial ships that made non-stop over passage through the Turkish Straits in the last 5 years, covering the COVID-19 -and post-pandemic periods with economic instabilities was investigated along with variables of vessel characteristics such as; gross tonnage, size and type of vessel loads. Results of the present study reveal that the maritime traffic density between 2019 and 2023, was influenced by the pandemic crisis, when harsh quarantine measures of lockdown and curfews in the first shock wave. In the aftermath, conflicts between Ukraine and Russia led to economic recession or upheaval with instabilities in Brent oil prices. For the period examined in this study, the number of non-stop over passage vessels and gross tonnages used the Turkish Straits were affected by the pandemic outbreak and Brent oil price variations. The number of vessels decreased by 5.22% from 84,871 to 80,440 during the epidemic in 2020, and by 5.38% from 43.342 to 42.340 during the global recession in 2022. Overall, the number of non-stop over passage vessels using the Turkish Straits between 2019 and 2023 declined by 1.15%, while the gross tonnage and ship length increased by 3.44% and 13.24%, respectively. In total, the number of non-specific tankers (TTA) and those carrying chemicals (TCH) increased by 2.92% and 10.97%, respectively, but a 13.25% decrease was noted for the liquefied petroleum gas (LPG) tankers over the 5 years. Considering that the world trade network is largely dependent on maritime transportation, identifying the changes in maritime transportation with the interrelation of Brent oil during global crises may provide important data for strategy building of best trade management with foresights to world economic crises.

Do oil market shocks affect financial distress? Evidence from firm-level global data

This study investigates the impact of three oil price shocks on financial distress of global firms using a dataset of 8130 firms across 48 countries from 2002 to 2022. It also analyses the role of energy diversification in the relationship between oil shocks and firm distress. The findings reveal that aggregate demand and specific demand shocks increase firm distress risk, while supply shocks reduce it. Furthermore, the results suggest that energy diversification mitigates the impact of specific demand shocks on firm distress. The study also implements several robustness checks, and the results remain consistent. Potential policy implications are also discussed.

Global economic policy uncertainty and oil price uncertainty: Which is more important for global economic activity?

Using monthly data spanning from January 1997 to November 2022, this paper investigates the influence of global economic policy uncertainty (GEPU) and oil price uncertainty (OPU) on global economic activity using a structural vector autoregressive (SVAR) model. The findings from the baseline model reveal the adverse effects of both GEPU and OPU shocks on the global economy. The counterfactual analysis highlights that the negative impact of OPU shocks primarily stems from direct effects, while approximately half of the adverse impact of GEPU shocks is indirectly transmitted through amplifying OPU. Further examination of the indirect effects of these shocks uncovers that lagged effects primarily drive the indirect impact of OPU, whereas the indirect impact of GEPU is mainly driven by common shocks. These findings suggest a more substantial and independent impact of OPU shocks compared to GEPU shocks. Additionally, employing a time-varying vector autoregressive with stochastic volatility (TVP-VAR-SV) model, this paper explores the same dataset. The results of time-varying impulse responses illustrate a diminishing effect of GEPU shocks over the sample period, whereas the impact of OPU shocks initially decreases before subsequently increasing.

Asymmetric impact of oil structural shocks on non-ferrous metals supply chains: A groundbreaking multidimensional quantile-on-quantile regression

This paper examines the predictability of various oil price shocks on the returns of non-ferrous metals from the supply and demand sides in the US, UK, and China under different market conditions. An innovative multidimensional quantile-on-quantile (MD-QQ) regression approach is proposed to address this topic, which extends traditional univariate QQ regression to multivariate cases, addressing the limitation of omitted variables in the benchmark QQ method. The findings reveal that the forecasting of oil supply shocks on the non-ferrous metal supply chain is generally insignificant. Nevertheless, oil supply shocks will transmit negative (positive) actions when the non-ferrous metal supply-side (demand-side) is in a bear (bull) market. The implication of oil demand shocks on the non-ferrous metal supply chain is generally positive, while the supply-side market of Chinese non-ferrous metals displays mutability in response to oil demand shocks under certain extreme market conditions. Conversely, oil risk shocks have a negative impact across the entire non-ferrous metal supply chain. Their effects are more pronounced when the non-ferrous metal demand market is bearish, exhibiting asymmetric characteristics. Oil demand shocks and risk shocks have a stronger impact on non-ferrous metal supply chains in the US and UK than in China. Our research not only confirms the estimation bias caused by missing variables in traditional baseline models but also provides new insights into the connection between the non-ferrous metals and oil markets by adopting the fresh method.

Oil prices and the renewable energy transition: Empirical evidence from China

This paper explores the effect of oil price, gross domestic product (GDP), and carbon dioxide (CO2) emissions on renewable energy consumption in China from 1990 to 2020, utilizing the canonical cointegrating regression (CCR) method. The findings indicate that the oil price, GDP and CO2 emissions positively and significantly affect renewable energy consumption over the examined time frame. Numerically, a 1% increase in oil prices, GDP, and CO2 emissions results in a 0.16%, 0.39%, and 1.70% increase in renewable energy consumption, respectively. The positive effect of oil prices on renewable energy consumption can be seen as the cost advantage of renewable energy, which may grow with rising oil prices, leading to a rise in its adoption. The study underscores the significance of promoting renewable energy usage, emphasizing the need for policies that aid energy security and environmental sustainability.