Refined Oil Prices Research Articles

WTI, Brent or implied volatility index: Perspective of volatility spillover from oil market to Chinese stock market.

This study investigates the impact of oil market uncertainty on the volatility of Chinese sector indexes. We utilize commonly used realized volatility of WTI and Brent oil price along with the CBOE crude oil volatility index (OVX) to embody the oil market uncertainty. Based on the sample span from Mar 16, 2011 to Dec 31, 2019, this study utilizes vector autoregression (VAR) model to derive the impacts of the three different uncertainty indicators on Chinese stock volatilities. The empirical results show, for all sectors, the impact of OVX on sectors volatilities are more economically and statistically significant than that of realized volatility of both WTI and Brent oil prices, especially after the Chinese refined oil pricing reform of March 27, 2013. That implies OVX is more informative than traditional WTI and Brent oil prices with respect to volatility spillover from oil market to Chinese stock market. This study could provide some important implications for the participants in Chinese stock market.

Is market power the cause of asymmetric pricing in China's refined oil market?

The asymmetric response of Chinese refined oil prices to crude oil prices is essentially an issue of economic efficiency, and the collusion of the oil oligarchs is not conducive to the market-oriented reform and economic sustainability. The purpose of this paper is to test whether the prices of refined oil products in China does indeed have the asymmetric fluctuations of “rising more and falling less”, and to analyze whether there are unreasonable pricing behaviors colluding among oil companies. We first examine the relationship between refined oil prices and the crude oil price by applying the NARDL using the monthly data from June 2000 to May 2021, and then designs a two-stage regression process based on the EGARCH model to check whether the asymmetric pricing is the result of the market power formed by the oligopolistic collusion. The results show that the asymmetric reaction of gasoline and diesel prices to crude oil prices in China is basically the same. Only the long-run asymmetry has been confirmed while the short-run asymmetry has not passed the test. The long-term equilibrium price amid fluctuations in Chinese refined oil prices is slowly being pulled higher, most likely due to the increased market power of oil companies. Long term asymmetry means that the oligopoly market equilibrium is approaching monopoly. The cause is in the refining segment of refined oil, not in the retail segment because the EGARCH model has only successfully identified the market power in the refining sector. The joint tests indicate that the oil oligarchs may have passed the cost information, which is conducive to raising prices in the long term, to the price regulators, and there is an unreasonable part of China's refined oil prices that undermine market efficiency.

Is refined oil price regulation a “shock absorber” for crude oil price shocks?

This paper explores whether the government's control of refined oil prices can slow down this impact and play a “shock absorber” function. Adopting the SVAR model and divides the sample into two sub-samples according to the level of price regulation, it is found that the degree of price regulation of refined oil is very high before May 2009. At this time, the price regulation seriously hinders economic growth when the oil price falls. After May 2009, the degree of refined oil price control has been greatly reduced, and price control promotes the increase in industrial investment and GDP to a certain extent when oil prices rise and fall, and plays the function of “shock absorber”. In the post epidemic era, in the face of the current geopolitical conflict, it is necessary to continue to implement refined oil price control measures in line with China's situation in the short term, and gradually release oil price control in the long run to form a market price reflecting the relationship between supply and demand. In addition, it is necessary to improve and develop China's crude oil futures market as soon as possible and establish a modern oil circulation system.

Impact of oil price uncertainty shocks on China’s macro-economy

This study investigates the impacts of crude oil price uncertainty shocks on China’s macro-economy using empirical and theoretical approaches. The vector auto-regression with stochastic volatility in mean (VAR-SVM) model reveals that increasing oil price uncertainty significantly depresses output and raises inflation. To fully understand the transmission channels of oil price uncertainty shocks, we develop a new Keynesian dynamic stochastic general equilibrium (DSGE) model that incorporates oil demand of household, intermediate sector, and transportation sector. Increasing income uncertainty induced by high oil price volatility leads to enhanced precautionary saving and thus a decrease in consumption, particularly durable consumption, of individual households. The precautionary working mechanism is plausible in the changes of households’ labor supply and firms’ production behaviors when oil price uncertainty increases. Furthermore, with decreasing forward-looking market demand, intermediate firms choose higher prices to avert risk, which results in higher inflation in China. To explore how to mitigate the negative effects of oil price uncertainty, we consider a number of possible factors. The results illustrate that increasing competitiveness among transportation firms, reducing oil intensity of intermediate sector, targeting headline inflation by the central bank, and decreasing the Frisch elasticity of labor supply are effective measures. Our findings also suggest that deregulation of refined oil price in China would not amplify negative effects of oil price uncertainty.

Monitoring the Shelf Life of Refined Vegetable Oils under Market Storage Conditions-A Kinetic Chemofoodmetric Approach.

Most physicochemical and sensory properties of edible vegetable oils are not stable over time. One of the main causes of quality depletion of vegetable oils is oxidation, which influences sensory acceptability and nutritional value, and could even lead to toxic compounds. That negative influence affects international refined oil prices and the variety of its culinary applications. Modelling quality depletion of vegetable oils and establishing the shelf life, generally accepted as the time until rancidity becomes evident, already remains a challenge for the industry. Hence, this paper will show a promising chemofoodmetric methodology, as an easy and straightforward tool to estimate the current shelf-life of refined vegetable oils, based on a comprehensive characterisation of quality depletion-related changes over storage time under real market conditions. The methodology for building a multivariate kinetic ageing-based model is described, taking into account all time-related physicochemical parameters and chemometric processing tools. From a particular ageing state, multiparametric models are able to reliably infer the expected storage time for each vegetable oil so that it remains consistent with acceptability requirements. The results of the study pointed out the accuracy of multivariate shelf-life modelling with regard to univariate modelling. Discrepancies were found in the oxidation rates of oils extracted from different plant seeds.

Tail Dependency and Risk Spillover between Oil Market and Chinese Sectoral Stock Markets—An Assessment of the 2013 Refined Oil Pricing Reform

The Chinese refined oil pricing reform in 2013 has brought its refined oil price to be more aligned with the international oil price, helping to mitigate prior distorted pricing mechanisms. Its impact on the correlation, tail risks, and spillover effects between the international crude oil market and Chinese sectoral stock markets warrants empirical assessments. Time-varying copula models and conditional VaR (CoVaR) are employed to examine the correlation between the international oil market and Chinese sectoral stock indexes before and after the 2013 pricing reform, as well as the tail risk and spillover effects of the extreme and moderate oil markets. The results show that: (1) the correlation between the oil market and all 11 Chinese stock sectors is positive both before and after the reform, but the correlation is weaker after the reform than before; (2) The downside tail risk of the extreme and moderate oil markets to most Chinese stock market sectors, and the upside tail risk of the moderate oil market to most stock sectors are lower after the reform; (3) Tail risk spillover effects of extreme oil market on all sectors exist before and after the reform; (4) The upside tail risk spillover effects of moderate oil market exist in most sectors before the reform, but they almost all disappear after the reform. The downside risk spillover effects of the moderate oil market do not exist before or after the reform. The findings provide valuable references for portfolio management and future policy update.

Global crude oil and the Chinese oil-intensive sectors: A comprehensive causality study

We study causal relations between the return of Brent crude and the oil-intensive equity indices (agricultural, construction, industrial and transportation) in China using daily data from 2005 to 2019. We unite the extensive Granger causality tests proposed over the past two decades that are based on the cross-correlation function approach to uncover causality in mean, variance, risky quantiles and distribution. We use subsample analysis to study changes of causal links after the US subprime financial crisis in 2008 and the Chinese domestic refined oil pricing reformation in 2013. We find bidirectional causality in variance and distribution between the Chinese industries and global oil in each subperiod. Before the oil reform, most of the sectors cause crude oil in mean, which coincides with the rapid economic growth in China. As the Chinese markets become more exposed to international oil after the reformation, extreme negative returns of global oil benefit most oil-intensive industries while positive outlook in Brent adversely affects most sectors.

Why the Effects of Oil Price Shocks on China’s Economy are Changing

Some studies on developed economies have revealed that the impacts of oil price shocks have decreased while conclusions about China remain occluded. We investigate the changing effects of oil price shocks on China’s macroeconomy and discuss the causes. A time-varying parameter vector autoregressive (VAR) model reveals that impacts of oil price shocks on China’s economy have shown a downward trend since 1997. The responses of the real output are much greater and last longer than those of inflation. Then a new Keynesian dynamic stochastic general equilibrium model is developed to synthetically explore the causes. The results indicate that decreasing oil intensity and monopoly power reduce the effects of oil price shocks, while increasing capital intensity in production amplifies them. Other factors-such as changing price stickiness, deregulation of refined oil prices, and shifts in monetary policy targets-have limited effects on the relationship between oil price shocks and China’s macroeconomy.

A Comparative Study on the Dynamic Correlation Effect of Foreign and Domestic Gasoline and Diesel Price Fluctuations

Abstract This paper uses the law of one price (LOP) and the DCC-GARCH method based on ten-day price sequences. The findings indicate that, compared with the international refined oil markets with mature market-oriented pricing mechanisms, only in the Chinese market do gasoline and diesel prices meet the LOP. This finding shows that, in the context of the gradual integration of the global refined oil market, the international level of China's refined oil price is still quite low. The price reforms pertaining to China's refined oil products still need to be pushed forward in the direction of marketization and internationalization.

Finding Loopholes in Sanctions: Effects of Sanctions on North Korea’s Refined Oil Prices

The international community’s sanctions against North Korea, triggered by North Korea’s nuclear tests and by missile development in the country, are considered the strongest sanctions in history, banning exports of North Korea’s major items and limiting imports of machinery and oil products. Accordingly, North Korea’s trade volume decreased to the level of collapse after the sanctions, meaning that the sanctions against North Korea were considered to be effective. However, according to this paper, which analyzed the price fluctuations of refined petroleum products in North Korea through the methodology of an event study, the market prices of oil products were only temporarily affected by the sanctions and remained stable over the long run despite the restrictions on the volumes of refined petroleum products introduced. This can be explained by evidence that North Korea has introduced refined oil supplies that are not much different from those before the sanctions through its use of illegal transshipments even after the sanctions. With regard to strategic materials such as refined oil, the North Korean authorities are believed to be desperately avoiding sanctions by, for instance, finding loopholes in the sanctions to meet the minimum level of demand.

Oil price fluctuation, stock market and macroeconomic fundamentals: Evidence from China before and after the financial crisis

In this paper we investigate the long-term connections between crude oil futures price and China stock market across the recent financial crisis by using a nonlinear threshold cointegration method within a multivariate framework. Three key macroeconomic fundamentals, i.e., foreign exchange market, domestic economic development and total foreign trade volume in China are used to detect their functions as transmission channels between oil futures market and China stock market. Different from extant literature, our empirical results show that firstly oil futures market has significant impacts on China stock market through both a direct way and an indirect way by the macroeconomic channels. Secondly, there are significant long-term cointegration relationships between crude oil futures price and China stock market even if two structural breaks in this relationship are observed in March 2008 and December 2012, respectively. The long-term connections between them vary dramatically at different market regimes, and are enhanced greatly in recent years with the adjustments in refined oil pricing mechanism and exchange rate regime in China. Finally, we find that, among the three macroeconomic fundamentals, exchange rate market plays the most significant role in transforming the impacts of oil prices on China stock market particularly after the financial crisis.

Forecasting the development of China's coal-to-liquid industry under security, economic and environmental constraints

Coal-to-liquid (CTL) technology has attracted attention in China as an alternative way to alleviate oil shortages. However, due to low profits and environmental problems, Chinese CTL policy is cautious and unstable, rendering the future development of CTL technology uncertain. Considering security, economic and environmental constraints, this study uses system dynamics models to predict the long-term development of the CTL industry in China. The results show that CTL production will steadily increase over the next few years, and a greater increase will occur after 2021. If the government will not provide support policies for CTL industry, we forecast CTL production will be 29.3 million tons by 2030. Once government actively supports CTL, its production is projected to reach 51.8 million tons, which is 45 times greater than that in 2015. When environmental issues are also considered, the production is expected to 47.3 million tons. The sensitivity analysis shows that under different refined oil prices, CTL production ranges from 29.3 to 56.3 million tons. At present, China's CTL only accounts for 0.2% of its oil consumption, and the EROI value of CTL is approximately 0.9:1. The low EROI implies little importance for CTL from a net energy perspective. Based on these research findings, this research offers some relevant policy suggestions.

An event study analysis of price adjustment of refined oil and air quality in China.

Since marketization of the refined oil price, the Chinese government has used refined oil price adjustments to control air pollution. Using an event study analysis, we examine whether these price adjustments have impacted air quality. We test the abnormal returns of 12 price adjustments between 2014 and 2015 in 51 major cities of China. The results show that the impact on air quality of refined oil price decreases is larger than the impact of oil price increases. Although results indicate air quality has deteriorated, the impact is insignificant for most of the cities. Consequently, we conclude that price suspension of refined oil has had a negligible impact on air quality. This policy is not a viable method to improve the air quality in the short run.

On the spot-futures relationship in crude-refined petroleum prices: New evidence from an ARDL bounds testing approach

This paper studies the relationship between spot and futures prices of crude and refined petroleum for the period spanning from January 2007 to April 2015. It investigates long-run and short-run elasticities and causality using the ARDL bounds testing approach and vector error correction model. Main finding confirm the existence of long-run equilibrium relationships among spot-futures prices. The short and long-run elasticities exist between spot and futures prices and between crude and refined oil prices except for gasoline, with merely great dependence in the short-run. The speed of adjustment to the long-run equilibrium is overall moderate, but is faster for refined oil (compared to crude oil) on spot markets (compared to futures markets). Short run causality tests prove that futures prices lead spot prices for refined oil and that short run and long run causalities reveal that oil markets are inefficient in the short-run, but they become efficient in the long-run.

Risk spillover of international crude oil to China's firms: Evidence from granger causality across quantile

This paper investigates the extreme risk spillover of international crude oil to stock returns for 529 firms listed on the A-share market of the Shanghai stock exchange. We apply a kernel-based nonparametric method to test quantile-on-quantile Granger causality from crude oil to firm returns. From the perspective of firm-level analysis, the findings are outlined as follows. First, our empirical results provide strong evidence to suggest the asymmetry in the linkage of extreme movements from crude oil to firm returns, that is, the case of positive risk spillovers are more severe than the case of negative risk spillovers; In particular, the down-to-down risk spillover is the most serious case. This phenomenon unravels the strong driving force of economic cycles. Second, risk transmission from oil price shocks to firm returns depends on the firm's industry features. In addition to the usual focus on inter-industry difference, we also note the within-industry heterogeneity. Third, we confirm that China's refined oil pricing reform of March 27, 2013 has had intensifying effects on the negative spillovers from oil prices to firms. For investors, we emphasize not only the awareness of the predictive power between extreme risks from international crude oil to China's firms but also the existence of heterogeneity in these predictive abilities across firms.

Refined oil prices with family cars

Nowadays, more and more cars have begun to enter into innumerable families; the family car has become a necessity for Chinese households who have certain purchasing power. However, the ups and downs of oil prices have brought some impact on people's automobile consumption activities. Therefore, after collecting the information of the oil price and family car consumer, carried on through in-depth analysis of the relevant data with reasonable relationship, and then developed a suitable for China's national conditions and finished oil pricing model, thereby the National Development and Reform Commission have proposed the suggestion for China's refined oil pricing mechanisms and promoting the healthy development of new energy vehicles with specific measures. For question 1, through the problem analysis and information access, combined with the past and current situation of the domestic refined oil prices, we analyze the following seven factors: international crude oil prices, China's annual crude oil imports, China's annual crude oil exports, crude oil output in China, China's annual GDP per capita, China's annual consumption of crude oil, the total annual energy consumption in China, all have influence on China's refined oil prices. By monadic linear regression analysis, annual average prices of domestic refined oil products have a certain correlation with the various influencing factors, and then by multiple linear regression way eventually concluded the final relationship between oil prices and the influence factors, which compared with the current price, and make reasonable evaluation model. Through the establishment of various influencing factors and function of time, and using the evaluation model for refined oil product price to make reasonable forecast. According to this model, in order to predict refined oil product price as $122.15 per barrel in 2016. For question two, we basically sums up three key factor which influence the quantity of family vehicle: China's oil product prices, the annual GDP per capita, total road mileage. Through Excel to make the relationship curves of different quantity of family cars against influencing factors, and use Grey Forecasting method to forecast the quantity of family cars. And carries on the residual error test, it is used to conclude that the rationality of the model is highly. The number of private cars of the city of xi 'an is predicts that to 8.302 million vehicles by 2020. For question three, we discussed the relationship between international crude oil prices and domestic exports of crude oil export with domestic refined oil prices, through its multiple linear regressions to get the final pricing model. For question four, according to three previous established models, we proposed China's refined oil pricing mechanism proposal to the national development and Reform Commission: perfect price controls, deeper product market, and integration of resources consideration and environmental protection class tax types, adjust the consumption tax collection and Administration links, and improve the production cost accounting.

The effect of gasoline consumption tax on consumption and carbon emissions during a period of low oil prices

Since June 2014, international crude oil prices have fallen sharply; because of the new refined oil pricing mechanism, China's domestic refined oil prices fell with the international oil prices. During the period from November 28, 2014, to January 12, 2015, the China's domestic refined oil consumption tax had been increased for three times. Then the lowest price of refined oil was set to protect refined oil prices from further declining. Through financial means used to control the prices of refined oil, can the goals of oil consumption reduction and harmful emissions mitigation be realised? Is it reasonable to use such a way adjusting refined oil consumption tax? In this paper, we construct an econometric model, investigate the elasticity of China's gasoline demand, and then make a further research on the effect of carbon dioxide (CO2) emission reduction. We also study the rationality of the way adjusting the consumption tax. We propose some policy suggestions based on the research in the context of the frequent fluctuations in international oil prices and the rising dependence on international crude oil in China. According to our study, compared with the developed countries (e.g., the United States), China's gasoline demand elasticity is not high; however, a certain extent, tax adjustment can still guide consumers towards saving energy, so as to achieve the purpose of controlling gasoline consumption and reducing CO2 emissions. The frequent tax adjustment reveals the irrationality of the refined oil pricing mechanism and the taxes policy. China has entered the 13th five development term. More reform measures should be proposed to build the crude oil market and improve the taxes policy.

Rockets and Feathers: The Asymmetric Effect between China’s Refined Oil Prices and International Crude Oil Prices

This paper employs an asymmetric error-correction model (AECM), and uses monthly data on wholesale prices of gasoline and diesel products in China and international crude oil prices from February 2006 to October 2013 to examine whether China’s gasoline and diesel prices adjust asymmetrically to international crude oil price changes. Our empirical results suggest that increases and decreases in international oil prices have asymmetric effects on both wholesale prices of gasoline and diesel fuel in China, and that both increases and decreases in international oil prices have a greater effect on diesel prices than on gasoline prices in China. If there is no change in the maximum retail price, the asymmetry results from the transmission of wholesale prices in China with international oil prices. However, if there is a change in maximum retail prices, both international oil prices and maximum retail prices cause the asymmetry.

The relationship between international crude oil prices and China\u2019s refined oil prices based on a structural VAR model

With the frequent fluctuations of international crude oil prices and China’s increasing dependence on foreign oil in recent years, the volatility of international oil prices has significantly influenced China domestic refined oil price. This paper aims to investigate the transmission and feedback mechanism between international crude oil prices and China’s refined oil prices for the time span from January 2011 to November 2015 by using the Granger causality test, vector autoregression model, impulse response function and variance decomposition methods. It is demonstrated that variation of international crude oil prices can cause China domestic refined oil price to change with a weak feedback effect. Moreover, international crude oil prices and China domestic refined oil prices are affected by their lag terms in positive and negative directions in different degrees. Besides, an international crude oil price shock has a significant positive impact on domestic refined oil prices while the impulse response of the international crude oil price variable to the domestic refined oil price shock is negatively insignificant. Furthermore, international crude oil prices and domestic refined oil prices have strong historical inheritance. According to the variance decomposition analysis, the international crude oil price is significantly affected by its own disturbance influence, and a domestic refined oil price shock has a slight impact on international crude oil price changes. The domestic refined oil price variance is mainly caused by international crude oil price disturbance, while the domestic refined oil price is slightly affected by its own disturbance. Generally, domestic refined oil prices do not immediately respond to an international crude oil price change, that is, there is a time lag.

International oil price uncertainty and corporate investment: Evidence from China's emerging and transition economy

We develop and estimate a dynamic model of investment to investigate the impact of international oil price uncertainty on corporate investment expenditures in China's emerging and transition economy. We further examine whether state ownership affects the relationship between oil price uncertainty and corporate investment. Consistent with the model's prediction, the main finding is that oil price uncertainty exerts a negative impact on corporate investment expenditures. In addition, compared with state-owned listed companies, the negative influence of oil price uncertainty on corporate investment is more significant for non-state-owned listed companies. Our further analysis, using the market-oriented reform of refined oil pricing in 2008 as a quasi-natural event, shows the variation between the low-degree marketization period and the high-degree one in terms of the relationship between international oil price uncertainty, state ownership and corporate investment expenditures.