Slow oil shocks and the “weakening of the oil price–macroeconomy relationship”

Many papers have been documenting and analysing the asymmetry and the weakening of the oil price–macroeconomy relationship as off the early eighties. While there seems to be a consensus about the factors causing the asymmetry, namely adjustment costs which offset the benefits of low energy prices, the debate about the weakening of the relationship is not over yet. Moreover, the alternative oil price specifications which have been proposed by Mork (1989), Lee et al. (1995), and Hamilton (1996) to restore the stability of the relationship fail to Granger cause output or unemployment in post-1980 data. By using the concept of accelerations of the oil price, we show that the weakening of this relationship corresponds to the appearance of slow oil price increases, which have less impact on the economy. When filtering out these slow oil price variations from the sample, we manage to rehabilitate the causality running from the oil price to the macroeconomy and show that far from weakening, the oil price accelerations–GDP relationship has even been growing stronger since the early eighties.     

Examining crude oil price – Exchange rate nexus for India during the period of extreme oil price volatility

This study probes crude oil price – exchange rate nexus for India using daily data for the time span July 2, 2007–November 28, 2008. Generalized autoregressive conditional heteroskedasticity (GARCH) and exponential GARCH (EGARCH) models have been employed to examine the impact of oil price shocks on nominal exchange rate. The study reveals that an increase in the oil price return leads to the depreciation of Indian currency vis-à-vis US dollar. The study also establishes that positive and negative oil price shocks have similar effects, in terms of magnitude, on exchange rate volatility and oil price shocks have permanent effect on exchange rate volatility.     

Does oil price affect the value of firms? Evidence from Tunisian listed firms

A new debate on the potential impact of oil price changes on the value of firms was initiated in this paper. Using a stochastic frontier approach, an attempt was made to derive the optimal value Q* of firms and calculate the Q value observed. Then the shortfall (Q*–Q) which represents the inefficiency term was explained. Starting from 19 industrial Tunisian firms listed on the Tunis Stock Exchange between 2007 and 2011, the fact that variation of oil prices can largely explain distortions in the value of firms was empirically demonstrated.     

Is the recent low oil price attributable to the shale revolution?

The U.S. Energy Information Administration estimates that approximately 52% of total U.S. crude oil was produced from shale oil resources in 2015. We examine whether the recent low crude oil price is attributable to this shale revolution in the U.S., using a SVAR model with structural breaks. Our results reveal that U.S. supply shocks are important drivers of real oil price and, for example, explain approximately a quarter of the 73% decline between June 2014 and February 2016. Failure to consider statistically significant structural changes results in underestimating the role played by global supply shocks, while overestimating the role of the demand shocks.     

What is behind the increase in oil prices? Analyzing oil consumption and supply relationship with oil price

The continuing increases in oil prices have renewed the argument over the real culprits behind these movements. The growth in demand for oil in international markets, especially from the United States and China, is often identified as the main source of consumption pressure on prices, and thus the upward trend in oil prices. This paper uses unit root tests with two endogenous breaks to analyze the characteristics of oil prices, production, and consumption for several countries. By taking into account structural breaks, we find that many countries’ oil consumption and oil prices are stationary, while other countries are not. We also perform causality tests to determine the direction of any possible relationship between oil price and oil consumption and production. Our statistical analysis reveals that production variables cause oil prices, while oil prices tend to cause consumption. As a result, we claim that the blame for the recent fluctuations in oil prices is more appropriately associated with supply factors, not consumption influences.     

The economic viability of gas-to-liquids technology and the crude oil–natural gas price relationship

This paper explores the viability of a gas-to-liquids (GTL) technology and examines how GTL penetration could shape the evolution of the crude oil–natural gas price ratio. Much research has established the cointegrated relationship between crude oil and natural gas prices in the U.S. The persistently low U.S. natural gas prices in recent years seem to mark a shift in this relationship, and have led some in industry to begin considering investments in GTL capacity in the US. In order to look forward over decades when the underlying economic drivers may be outside of historical experience, we use a computable general equilibrium model of the global economy to evaluate the economic viability of GTL and its impact on the evolution of the crude oil–natural gas price ratio. Our results are negative for the potential role of GTL. In order to produce any meaningful penetration of GTL, we find it necessary to evaluate scenarios that seem extreme. With any carbon cap GTL is not viable. Moreover, even without a carbon cap of any kind, extremely optimistic assumptions about (i) the cost and efficiency of GTL technology and about (ii) the available resource base of natural gas and the cost of extraction, before the technology penetrates and it impacts the evolution of the crude oil–natural gas price ratio.     

On the intraday dynamics of oil price and exchange rate: What can we learn from China and India?

The main aim of this paper is to investigate the volatility determinants of crude oil and foreign exchange markets and jump spillover between them. We consider currencies of two major oil-importing countries (India and China) over the sample period of January 1, 2013 to October 31, 2019. We find evidence of positive return spillover from the oil to the foreign exchange market; however, there is a lack of return spillover in the other direction. Oil jumps appear to have a negative impact on exchange rate conditional volatility, and the latter responds asymmetrically to disentangled (positive and negative) oil price jumps. We also report disentangled exchange rate jumps' significant impact on conditional oil price volatility. These results, however, are asymmetric based on the nature of jumps and alternative oil price series. Finally, we do not find evidence of co-jump between the oil and foreign exchange markets. These results have important implications for investors and policymakers.     

How does oil price volatility affect non-energy commodity markets?

The influence of price volatility in the crude oil market is expanding to non-energy commodity markets. With the substitution of fossil fuels by biofuel and hedge strategies against inflation induced by high oil prices, the link between crude oil market and agriculture markets and metal markets has increased. This study measures the influence of the crude oil market on non-energy commodity markets before and after the 2008 financial crisis. By introducing the US dollar index as exogenous shocks, we investigate price and volatility spillover between commodity markets by constructing a bivariate EGARCH model with time-varying correlation construction. The results reveal that the crude oil market has significant volatility spillover effects on non-energy commodity markets, which demonstrates its core position among commodity markets. The overall level of correlation strengthened after the crisis, which indicates that the consistency of market price trends was enhanced affected by economic recession. In addition, the influence of the US dollar index on commodity markets has weakened since the crisis.     

Economic analysis of coal price–electricity price adjustment in China based on the CGE model

In recent years, coal price has risen rapidly, which has also brought a sharp increase in the expenditures of thermal power plants in China. Meantime, the power production price and power retail price have not been adjusted accordingly and a large number of thermal power plants have incurred losses. The power industry is a key industry in the national economy. As such, a thorough analysis and evaluation of the economic influence of the electricity price should be conducted before electricity price adjustment is carried out. This paper analyses the influence of coal price adjustment on the electric power industry, and the influence of electricity price adjustment on the macroeconomy in China based on computable general equilibrium models. The conclusions are as follows: (1) a coal price increase causes a rise in the cost of the electric power industry, but the influence gradually descends with increase in coal price; and (2) an electricity price increase has an adverse influence on the total output, Gross Domestic Product (GDP), and the Consumer Price Index (CPI). Electricity price increases have a contractionary effect on economic development and, consequently, electricity price policy making must consequently consider all factors to minimize their adverse influence.     

Do all clean energy stocks respond homogeneously to oil price?

This paper investigates whether the relationship between oil price and clean energy stock is homogeneous across sub-sectors of the clean energy stock market and its implications for portfolio diversification and clean energy finance policy. We contribute to the literature by being the first empirical paper to document the oil price-clean energy stock relationship at a disaggregate level, thereby providing a more detailed picture of the clean energy stock market. Our findings show that the relationship between oil price and clean energy stock varies largely across clean energy stock sub-sectors. Specifically, biofuel and energy management stocks are the most connected to oil price, while wind, geothermal, fuel cell stocks are among the least connected to oil price. This implies that the hedging cost and effectiveness of a clean energy investment portfolio is dependent on the type of clean energy stock included, therefore, active portfolio management at a disaggregate level is of particular importance. Additionally, policy should take into account the specific characteristics of individual clean energy sub-sectors in order to effectively promote clean energy investment.     

Paying the full price of steel – Perspectives on the cost of reducing carbon dioxide emissions from the steel industry

This study examines the impacts felt downstream of carbon pricing and investments made in CO₂ abatement within the steel industry. Using the supply of steel to a passenger car as a case study, the effects of a steel price increase on cost structures and price at each step of the supply chain were assessed. Since the prices of emission allowances under the European Union Emissions Trading System fall well below those required to unlock investments in low-CO₂ production processes in the integrated steelmaking industry this paper seeks to pave the way for a discussion on complementary policy options. The results of the analysis suggest that passing on the compliance costs of the steel industry would have only marginal impacts on costs and prices for the end-use sectors (e.g., on the production cost or selling price of the passenger car). Under the assumptions made herein, at a carbon price of 100 €/tCO₂, the retail price of a mid-sized European passenger car would have to be increased by approximately 100–125 €/car (<0.5%) to cover the projected increases in steel production costs.     

The third oil price surge – What’s different this time?

The period from 2003 to 2008 was marked by an oil price increase comparable to the two oil price crises in the 1970s. This paper looks in detail at the situation of the oil price crises 30 years ago and compares them along various aspects on the demand and supply side with the recent price increase to identify similarities and differences. While both oil price crises in 1973 and 1979/1980 were ultimately caused by supply actions of members of the Organisation of Petroleum Exporting Countries (OPEC), all three oil price crises were preceded by high demand growth. Other aspects that favoured a high oil price in all three cases were low investments in new oil fields, as a consequence low spare capacity, and a weak US dollar. In addition, the recent oil price surge has been characterised by a high global refinery utilisation and refineries that did not adapt fast enough to the rising demand for lighter oil products. Moreover, broader geopolitical uncertainties, combined with risks associated with the oil trade helped push the oil price into a triple-digit zone. Speculation played only a limited and temporary role in accelerating price movements during the recent price increase.     

Hybrid central–WENO scheme for the large eddy simulation of turbulent flows with shocks

To provide an effective numerical method for the large eddy simulation (LES) of turbulent flows with shocks, a hybrid scheme is developed in a finite volume framework based on the fourth-order central scheme and the third-order weighted essentially non-oscillatory (WENO) scheme. A total of six easy-to-implement and promising switch functions (SFs) are examined in the hybrid central–WENO scheme for the LES of compressible turbulent flows. Both the dissipation and dispersion of the developed hybrid central–WENO scheme are theoretically confirmed using the Fourier technique. Then, the effectiveness and accuracy of this scheme and the SFs are numerically tested by three problems: decaying compressible isotropic turbulence, inviscid, and turbulent transonic flow over a bump. The numerical results show the developed hybrid scheme, coupled with the SF based on local velocity divergence and pressure gradient, has excellent capabilities of capturing shocks and resolving turbulence.     

A study of the performance,emission and combustion characteristics of a compression ignition engine using methyl ester of paradise oil–eucalyptus oil blends

The significance of this study is the complete replacement of diesel fuel with bio-fuels. For this purpose; bio-fuels, namely, methyl ester of paradise oil and eucalyptus oil were chosen and used as fuel in the form of blends. Various proportions of paradise oil and eucalyptus oil are prepared on a volume basis and used as fuels in a single cylinder, four-stroke DI diesel engine, to study the performance and emission characteristics of these fuels. In the present investigation a methyl ester derived from paradise oil is considered as an ignition improver. The results show a 49% reduction in smoke, 34.5% reduction in HC emissions and a 37% reduction in CO emissions for the Me50–Eu50 blend with a 2.7% increase in NO_x emission at full load. There was a 2.4% increase in brake thermal efficiency for the Me50–Eu50 blend at full load. The combustion characteristics of Me50–Eu50 blend are comparable with those of diesel.     

Who benefits from local oil and gas employment? Labor market composition in the oil and gas industry in Texas and the rest of the United States

This paper examines local labor market outcomes from an oil and gas boom. We examine two main outcomes; the probability of employment and the log wages of workers employed outside the oil and gas industry for Texas and the rest of the United States across gender, race, and ethnicity. We find that men and women gain employment in the oil and gas industry during booms, but such gains are much larger for men and are largest for black and Hispanic men. We also find positive income spillovers for workers in other industries that are similar in magnitude across demographic groups.     

Application of different EOR techniques for the energy and recovery of Ashal’cha oil field

In this research, utilizing the reservoir and produced oil data, different enhanced oil recovery (EOR) techniques known as in-situ combustion, CO₂ flooding, and steam flooding were applied for Ashal’cha oil field in Republic of Tatarstan, Russia. For this purpose, In-Situ Combustion Predictive Model (ICPM), CO₂ Miscible Flood Predictive Model (CO₂PM) and Steam-flood Predictive Model (SFPM) are used. In addition to oil recovery, economic analysis of the discussed EOR applications was also conducted. By using the oil price forecast for 10 years, each EOR method is analyzed using their expenses and outcomes separately. Comparison among the EOR applications regarding the oil production, and economic feasibility was also given. Taking the reservoir and produced oil characteristics, oil production rate and economical payout time into account, it was observed that in-situ combustion is the most feasible and practical EOR method for Ashal’cha oil field.     

Modeling oil price–US stock nexus: A VARMA–BEKK–AGARCH approach

This study adds to the existing literature on oil price–US stock nexus in three ways. First, it employs the VARMA–AGARCH model developed by McAleer et al. (2009) within the context of BEKK framework using West Texas Intermediate (WTI) and Brent as proxies for oil market and S&P stocks as a proxy for US stock market. Secondly, it modifies the model to include endogenously determined structural break using the general structure for analyzing breaks with unit roots in Perron (2006). Third, it uses the adopted model to compute optimal portfolio weight and hedge ratios between oil price and US stocks using different sample data based on the break date. On average, our empirical evidence suggests a significant positive return spillover from US stock market to oil market and bi-directional shock spillovers between the two markets. In addition, there is significant own asymmetric shock effect in both markets while volatility spillover from oil market to stock market became pronounced after the break which coincides with the period of global economic slowdown. Similarly, the results of portfolio management differ across the sample data. More importantly, we find that ignoring structural break when it exists may exaggerate hedging effectiveness.     

Comparative analysis of various techniques to improve the performance of novel wheat germ oil – an experimental study

The current study aims to explore the opportunities of using the high viscous biofuel namely Wheat Germ oil (WGO) in a twin cylinder CI engine. High viscous fuels suffer from improper atomization leading to poor combustion and higher smoke emission. To address this problem, various techniques namely transesterification, fuel ionization and hydrogen induction were studied. WGO was converted to its ester which reduced the viscosity. Fuel ionization increases the vibrational frequency of the molecules, weakens the bonds and converted to ions, which increases the dispersion rate during injection and improves the combustion subsequently. Hydrogen is having faster flame speed and higher calorific value aids in combustion enhancement at its knock limited levels.The twin cylinder tractor engine selected for this experiment runs at a constant speed of 1500 rpm. The engine was run using diesel to achieve the preferred warm-up condition in order to use WGO, which hada cold starting problem. Tests were conducted with wheat germ biodiesel (WGBD), WGO with permanent magnet (PM), electromagnet (EM) and the combination of PM and EM-based fuel ionization system and finally WGO with hydrogen induction rates of 2%, 4.3%, 6.7% and 10.3% at maximum engine load condition. It is observed that all the techniques improved the performance of WGO. Among the techniques tested, hydrogen induction displayed better results in terms of performance and emission characteristics with a slight penalty in NO emission.     

The Peak of the Oil Age – Analyzing the world oil production Reference Scenario in World Energy Outlook 2008

The assessment of future global oil production presented in the IEA’s World Energy Outlook 2008 (WEO 2008) is divided into 6 fractions; four relate to crude oil, one to non-conventional oil, and the final fraction is natural-gas-liquids (NGL). Using the production parameter, depletion-rate-of-recoverable-resources, we have analyzed the four crude oil fractions and found that the 75 Mb/d of crude oil production forecast for year 2030 appears significantly overstated, and is more likely to be in the region of 55 Mb/d. Moreover, analysis of the other fractions strongly suggests lower than expected production levels. In total, our analysis points to a world oil supply in 2030 of 75 Mb/d, some 26 Mb/d lower than the IEA predicts.     

Optimization of the operating conditions for steam reforming of slow pyrolysis oil over an activated biochar-supported Ni–Co catalyst

Highly performing activated biochar-based catalysts were produced for steam reforming of slow pyrolysis oil. The raw biochar obtained from the slow pyrolysis step was physically activated with CO₂ at 700 °C and 1.0 MPa and then employed as support. Preliminary tests on steam reforming of acetic acid at 600 °C showed that using activated biochar-supported catalysts containing 10 wt % Ni and 7 wt % Co led to a conversion above 90% with a relatively slow deactivation rate. When a representative organic model compounds mixture was used as feed, relatively fast deactivation of the catalyst was observed, probably due to the adsorption of heavy organic compounds, which could subsequently react to form not easily desorbable reaction intermediates. However, the dual Ni–Co catalysts exhibited a good performance during the steam reforming of a real slow pyrolysis oil at 750 °C, showing long stability and a constant carbon conversion of 65%.