Optimization agricultural production under financial risk of water constraint in the Jordan Valley

Using high-frequency data the co-movements among crude oil prices are analysed in order to address the question of regionalization of the world crude oil market. Time-series econometrics in the form of error-correction modelling is applied for daily crude oil price data covering the time period 1988 to 2004 and in this framework topics like weak and strong exogeneity among three major oil prices – represented by Brent, OPEC and Texas (WTI) – are addressed. The empirical results are that causality is most likely bi-directional among these crude oil prices – and hence rejecting a regionalization hypothesis of the global oil market – and also an influence from the OPEC oil price towards Bent and WTI, which are usually claimed to have a benchmark role.     

A dynamic model of OPEC trade and production

A dynamic simulation model is presented of the world energy market, covering the period 1974–1995. It is used to assess and rank six possible price or output policies that OPEC may adopt with respect to oil exports, given a range of assumptions relating to such important variables as the rate of growth of domestic absorption of oil revenues within OPEC, the rate of capacity expansion for oil production, the responsiveness of investment in alternative sources of energy to changes in oil prices, and the rate of growth of world demand for energy. Furthermore, an illustrative analysis is given of possible conflict situations within OPEC, and their impact on the choice of price or output policy is discussed. The main conclusion drawn is that the supply response of alternative energy sources to OPEC oil will be the key to predicting whether oil prices will go up or down.     

The market power of OPEC 1973–2001

We apply a multi-equation dynamic econometric model on monthly data to test if the behaviour of OPEC as a whole or different sub-groups of the cartel is consistent with the characteristics of dominant producers on the world crude oil market in the period 1973–2001. Our results indicate that the producers outside OPEC can be described as competitive producers, taking the oil price as given and maximizing profits. The OPEC members do not fit the behaviour of price-taking producers. Our findings of low residual demand price elasticities for OPEC underpin the potential market power of the producer group, and are in line with the results in some recent energy studies. On the other hand, our findings indicate that neither OPEC nor different sub-groups of the cartel can be characterized as a dominant producer in the period 1973–1994. However, we find that the characteristics of a dominant producer to some extent fit OPEC-Core as from 1994. Thus, although OPEC clearly has affected the market price, the producer group has not behaved as a pure profit-maximizing dominant producer.     

OPEC and the monopoly price of world oil

The paper presents a dynamic model of the behavior of OPEC viewed as a monopolist sharing the oil market with a competitive sector. The main conclusion is that the recent increase in the price of oil was a once and for all phenomenon due to the formation of the cartel and that prices should remain approximately constant during the next twenty years.     

How is China's coke price related with the world oil price? The role of extreme movements

This paper focuses on the relationship between the world oil price and China's coke price, particularly with respect to extreme movements in the world oil price. Based on a daily sample from 2009 to 2015 and the ARJI-GARCH models and copulas, our empirical results show that China's coke price and the world oil price are characterized by GARCH volatility and jump behaviors. Specifically, negative oil price shocks lead to falls in China's coke returns on the following day while positive oil prices have no significant effects. In addition, current coke returns positively respond to the very recent oil price jump intensity, and a time-varying and volatile lower tail dependence is found between the world oil price and China's coke price. Our results are expected to have implications for coke producers and users and policy makers.     

Fundamentals and Oil Price Behaviour: New Evidence from Co‐integration Tests with Structural Breaks and Granger Causality Tests

As the world economy has undergone various changes and shocks, the oil market went through significant fluctuations during the period 1994–2015. This study focuses on discussing the possible factors that determine crude oil prices, which include world economic growth, market power of Organization of the Petroleum Exporting Countries (OPEC), non‐OPEC supply and the value of dollar, taking into account the structural changes that influence the study period, which is quarterly data for the period of 1994.Q1–2015.Q3. For time series stationarity tests, Zivot and Andrews (1992) and Perron (1997) unit root test with structural break is used. To test the existence of a long relationship in the presence of structural changes, the Gregory and Hansen (1996a, 1996b) method of co‐integration is used. For long‐run coefficient, we proceed to estimate fully modified least squares. The result shows a significant influence of non‐OPEC supply, the dollar appreciation and world gross domestic product growth, but OPEC did not have a significant effect on the price of oil, which is indicated by the structural break for OPEC capacity utilisation at 2002.Q1, that indicates the starting point of the loss of OPEC power. Establishing the presence of co‐integration, we apply the evaluation of Granger causality for co‐integrated data, using vector error‐correction model.     

Structural transformation and the oil price

What part of the high oil price can be explained by structural transformation in the developing world? Will continued structural transformation in these countries result in a permanently higher oil price? To address these issues I identify an inverted-U shaped relationship in the data between aggregate oil intensity and the extent of structural transformation: countries in the middle stages of transition spend the highest fraction of their income on oil. I construct and calibrate a multi-sector, multi-country, general equilibrium growth model that accounts for this fact by generating an endogenously falling aggregate elasticity of substitution between oil and non-oil inputs. The model is used to measure and isolate the impact of changing sectoral composition in the developing world on global oil demand and the oil price in the OECD. I find that structural transformation in non-OECD countries accounts for up to 53% of the oil price increase in the OECD between 1970 and 2010. However, the impact of structural transformation is temporary. Continued structural transformation induces falling oil intensity and an easing of the upward pressure on the oil price. Since a standard one-sector growth model misses this non-linearity, to understand the impact of growth on the oil price, it is necessary to take a more disaggregated view than is standard in macroeconomics.     

OPEC策略行为理论研究评述

OPEC策略行为理论是石油经济学研究的两大主题之一。本文在梳理20世纪70年代以来大量相关研究文献基础上,对OPEC策略行为理论的发展脉络、经典模型以及对经典模型的实证检验研究进行了较为全面分析。分析发现,虽然描述OPEC行为的模型越来越精细,但由于OPEC及其成员在不同时期策略行为方式和重点不同,每种模型只能解释部分时期的部分行为。OPEC对国际石油价格的影响主要体现在短期,长期看国际石油价格主要反映市场基本面变化。     

Identification problems in Granger causality tests based on the net oil price increase

The net oil price increase is one of the most popular models used to study the relationship between changes in the price of oil and macroeconomic activity. The model postulates that an increase in the price of oil has negative consequences for the economy if the new price exceeds the maximum price observed over a reference period of arbitrary length. The relationship between the net oil price increase and other economic variables is often evaluated with Granger causality tests, the results of which are sensitive to the choice of the reference period. If the reference price is chosen to best fit the data, it becomes an unidentified nuisance parameter under the null hypothesis, causing standard tests to over-reject the null. This article proposes a simple method to obtain correct critical values. Using US data for the period 1954 to 2012, it is found that these corrected critical values reduce, but do not eliminate support for the proposition that the net oil price increase Granger causes real USGDP growth.     

WESTERN HEMISPHERE PERSPECTIVES: OIL AND NATURAL GAS

Among nations that are net oil exporters, those that are net importers, and those in balance, there are conflicting interests regarding the price level—which currently is many times the competitive level. However, avoiding too brusque a price change is in the interest of all. A glut was no barrier to price increases after 1973, nor in 1978. And a glut is not an absolute barrier even today. Nations which comprise the oil cartel have short horizons and high discount factors. This increases the likelihood that they will attempt price hikes and makes any equilibrium precarious. Even non-cartel nations produce less oil and gas than would be profitable because governments, responding to public opinion, try to obtain more rent than there is to take. These governments apparently use unrealistically low discount rates. This paper attempts to point out parallel, common, and conflicting interests among the nations of the Western Hemisphere regarding price and production policy on crude oil and natural gas. In crude oil and oil products, Argentina is in balance, and Canada is practically so. Venezuela and Ecuador, both OPEC members, are net exporters. Mexico, a de facto member of OPEC, has observed a self-imposed quota more faithfully than some OPEC members. The rest of the nations in the hemisphere are net importers.     

TERRORISM AND THE RETURNS TO OIL

The effect of terrorism on global oil prices has been largely explained through demand-side effects. We estimate an empirical model to re-examine the effect of terrorism on the price of global oil stocks across oil market regimes that reflect different supply constraints. We believe that terrorism will have larger impacts when global capacity is tight (i.e. when global demand is close to global supply). This means that any shock to capacity (say by conflict) should have the largest impact on profits before the first OPEC shock in the early 1970s. Since then, conflict shocks would not allow firms to exploit production in the same way, thus reducing the available profits that could be garnered by such production manipulation. If capacity constraints are binding when a conflict occurs, then we predict that a positive stock price reaction can be expected for oil firms from such a shock. We exploit a new panel dataset to investigate the relationship between oil profitability and conflict, using conflict data from the top 20 oil producing and exporting countries in the world. We show that in the later part of our sample, 1974–2005, as cartel behavior of OPEC member countries has diminished and as conflict has become more regular and thus the information surrounding it noisier, oil stock prices do not increase in response to conflict. However, in earlier capacity constrained eras, we find that oil stocks can in fact increase in response to conflict. In some cases, the impact of conflict may cause the return of oil stocks to increase by as much as 10 percentage points.     

The prospects for OPEC five years after 1973/74

This paper surveys more than a dozen models of OPEC and world energy markets that have appeared since 1976. Included are simulation models, optimization models, and analyses of energy balances. Attention is focused on the outlook for OPEC prices and the demand for OPEC oil exports over the next fifteen years. Virtually all analyses agree that substantial changes from current market conditions are unlikely over the next few years. Beyond 1985, however, some project a severe tightening in world oil markets, while others project no such change from current conditions.     

Return and volatility spillovers between china and world oil markets

We examine return and volatility spillovers between China and world oil markets. This topic is of great importance because China is the world's second-largest oil importer and has exhibited substantial growth in oil consumption. Extending Diebold and Yilmaz's (2012) method of catching spillover dynamics, it is found that return and volatility spillovers between China and world oil markets are bi-directional and asymmetric. The Chinese oil market is highly affected by world oil markets and exerts an influence on world oil markets, although to a lesser extent. Moreover, the volatility spillover index has increased significantly since the peak of the last financial crisis in September 2008. Although the US oil market impacts China's market most in terms of spillover, the influence of China's oil market on the world oil market has intensified in recent years.     

国际石油价格与通货膨胀的溢出效应及动态相关性

国际石油价格大幅波动不可避免地给全球经济带来了一定程度的冲击和影响。文章采用向量自回归、多元GARCH-BEKK和DCC-GARCH模型对中美两国通货膨胀与国际石油价格之间的均值溢出效应、波动溢出效应及动态相关关系进行了实证检验。检验结果表明,国际石油价格与中国通货膨胀不存在任何方向的均值和波动溢出效应,美国通货膨胀与国际油价则存在双向显著的均值和波动溢出效应;中国通货膨胀与国际油价的动态相关关系显著弱于美国,不易受到国际油价的冲击和影响。从整体上看,当前中国通货膨胀与国际石油价格的关联性并不显著,但随着我国石油消费对进口依赖程度的不断提高,石油安全问题在可预见的未来将成为中国需要应对的一个现实挑战。因此,相关部门应及早采取有效措施,应对未来石油冲击对宏观经济的影响。     

The prospects for OPEC: A critical survey of models of the world oil market

The paper critically surveys seven recent models of the world oil market and their evaluations of the prospects for OPEC: Blitzer-Meeraus-Stoutjesdijk, Bohi-Russell, the U.S. Federal Energy Administration, Kennedy, Kalymon, Levy and Nordhaus. After a brief discussion of the basic approaches to the problem, we examine the model specifications in some detail. The principal contributions and conclusions are summarized, as are the main limitations of these models. We conclude with some suggestions of the most promising areas for future research.     

Fuel Efficiency Improvements: Feedback Mechanisms and Distributional Effects in the Oil Market

We study the interactions between fuel efficiency improvements in the transport sector and the oil market, where the efficiency improvements are policy-induced in certain regions of the world. We are especially interested in feedback mechanisms of fuel efficiency such as the rebound effect, carbon leakage and the “green paradox”, but also the distributional effects for oil producers. An intertemporal numerical model of the international oil market is introduced, where OPEC-Core producers have market power. We find that the rebound effect has a noticeable effect on the transport sector, with the magnitude depending on the oil demand elasticity. In the benchmark simulations, we calculate that almost half of the energy savings may be lost to a direct rebound effect and an additional 10% to oil price adjustments. In addition, there is substantial intersectoral leakage to other sectors through lower oil prices in the regions that introduce the policy. There is a small green paradox effect in the sense that oil consumption increases initially when the fuel efficiency measures are gradually implemented. Finally, international carbon leakage will be significant if policies are not implemented in all regions; we estimate leakage rates of 35% or higher when only major consuming regions implement fuel economy policies. Non-OPEC producers will to a larger degree than OPEC producers cut back on its oil supply as a response to fuel efficiency policies due to high production costs.     

Reconsidering the macroeconomics of the oil price in Germany: testing for causality in the frequency domain

This paper reconsiders the macroeconomics of the oil price for Germany. It investigates whether causality between the oil price and a selection of both macroeconomic and financial market variables differs between frequency bands. Both a bivariate frequency-wise causality measure and its higher-dimensional extension are applied. The main findings are that short-run causality exists between the oil price and variables such as short-term interest rates and the German share price index, while long-run causality is found between the oil price and long-term interest rates. Moreover, the oil price predicts the consumer price index at a high number of different frequencies, while no significant causality is found to run from the oil price to industrial production and the unemployment rate.      

The non-linear impact of oil price on the oil demand

ABSTRACT

A panel smooth transition regression model was adopted to analyse the non-linear impact of oil prices on oil demand. Data for 42 countries was obtained from the International Energy Agency for the time period spanning from January 1990 to June 2017. The results indicate that a threshold value does exist. Furthermore, when the oil price was lower than this threshold value, a positive relationship between oil price and oil demand was observed. When the price of oil was higher than the threshold value, however, a negative relationship between price and demand was found.