Pub Date : 2012-12-01DOI: 10.1111/j.1753-0237.2012.00216.x
Usama Al-mulali, Che Normee Binti Che Sab
This study investigated the impact of oil price shocks on the real exchange rate covering the most recent oil shock from 2000 to 2010 in 12 oil‐exporting countries, namely Algeria, Bahrain, Egypt, Indonesia, Kuwait, Nigeria, Oman, Qatar, Saudi Arabia, Sudan, United Arab Emirates and Venezuela. In this study, the panel model was implemented using six variables, namely the real exchange rate as the dependent variable, and oil price, government consumption expenditure, current account, inflation rate and gross domestic product based on the purchasing power parity as independent variables. The results we have arrived at show that the increases in oil prices have caused a real exchange rate appreciation in these countries.
{"title":"Oil Prices and the Real Exchange Rate in Oil‐Exporting Countries","authors":"Usama Al-mulali, Che Normee Binti Che Sab","doi":"10.1111/j.1753-0237.2012.00216.x","DOIUrl":"https://doi.org/10.1111/j.1753-0237.2012.00216.x","url":null,"abstract":"This study investigated the impact of oil price shocks on the real exchange rate covering the most recent oil shock from 2000 to 2010 in 12 oil‐exporting countries, namely Algeria, Bahrain, Egypt, Indonesia, Kuwait, Nigeria, Oman, Qatar, Saudi Arabia, Sudan, United Arab Emirates and Venezuela. In this study, the panel model was implemented using six variables, namely the real exchange rate as the dependent variable, and oil price, government consumption expenditure, current account, inflation rate and gross domestic product based on the purchasing power parity as independent variables. The results we have arrived at show that the increases in oil prices have caused a real exchange rate appreciation in these countries.","PeriodicalId":103205,"journal":{"name":"Wiley-Blackwell: OPEC Energy Review","volume":"60 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121829129","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2012-03-01DOI: 10.1111/j.1753-0237.2011.00204.x
Fardous Alom, B. Ward, Baiding Hu
Understanding the nature of volatility in commodity prices warrants adequate attention because such volatility is likely to lead to increased production, search and opportunity costs, as well as accelerate uncertainty and risk, contributing to a slowdown of economic activities. This study examines the asymmetry and persistency in the volatility of a set of petroleum future price returns—namely crude oil, heating oil, gasoline, natural gas and propane—within the framework of a set of non‐linear generalized autoregressive conditional heteroscedasticity (GARCH)‐type models. Specifically, we employ threshold GARCH, exponential GARCH, asymmetric power ARCH and component GARCH models using daily data over the period 1995–2010. The study reveals the following: over the full sample period of 1995–2010, all future price returns show persistent and asymmetric effects of shocks to the volatility but the level of persistency and degree of asymmetry differ product to product; over the subsample 1995–2001, persistency and asymmetry are evident for all series with the exception of gasoline future price returns; the recent subsample of 2002–2010 shows mixed evidence and all series show persistent effects of shocks to the volatility while asymmetry is supported in crude oil and propane only; the study also concludes that based on forecasting performance, no single model can be recommended but different models should be used based on the time periods involved and the nature of petroleum products. These findings also imply that in the presence of asymmetric and persistent volatility, policy measures should be taken to accommodate long lasting effects of shocks to the volatility. And since negative effects of shocks are not fully compensated by positive shocks, counter‐cyclical policies should be taken to counter the pessimistic and optimistic overreactions of businesses to ensure a stable business environment.
{"title":"Modelling Petroleum Future Price Volatility: Analysing Asymmetry and Persistency of Shocks","authors":"Fardous Alom, B. Ward, Baiding Hu","doi":"10.1111/j.1753-0237.2011.00204.x","DOIUrl":"https://doi.org/10.1111/j.1753-0237.2011.00204.x","url":null,"abstract":"Understanding the nature of volatility in commodity prices warrants adequate attention because such volatility is likely to lead to increased production, search and opportunity costs, as well as accelerate uncertainty and risk, contributing to a slowdown of economic activities. This study examines the asymmetry and persistency in the volatility of a set of petroleum future price returns—namely crude oil, heating oil, gasoline, natural gas and propane—within the framework of a set of non‐linear generalized autoregressive conditional heteroscedasticity (GARCH)‐type models. Specifically, we employ threshold GARCH, exponential GARCH, asymmetric power ARCH and component GARCH models using daily data over the period 1995–2010. The study reveals the following: over the full sample period of 1995–2010, all future price returns show persistent and asymmetric effects of shocks to the volatility but the level of persistency and degree of asymmetry differ product to product; over the subsample 1995–2001, persistency and asymmetry are evident for all series with the exception of gasoline future price returns; the recent subsample of 2002–2010 shows mixed evidence and all series show persistent effects of shocks to the volatility while asymmetry is supported in crude oil and propane only; the study also concludes that based on forecasting performance, no single model can be recommended but different models should be used based on the time periods involved and the nature of petroleum products. These findings also imply that in the presence of asymmetric and persistent volatility, policy measures should be taken to accommodate long lasting effects of shocks to the volatility. And since negative effects of shocks are not fully compensated by positive shocks, counter‐cyclical policies should be taken to counter the pessimistic and optimistic overreactions of businesses to ensure a stable business environment.","PeriodicalId":103205,"journal":{"name":"Wiley-Blackwell: OPEC Energy Review","volume":"33 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128301530","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2012-03-01DOI: 10.1111/j.1753-0237.2011.00206.x
Emre Ozsoz, M. Akinkunmi
By using monthly data for the 2004–2010 period and a vector error correction model approach, this paper evaluates the determinants of real exchange rates for the Nigerian Naira. Estimations suggest that oil prices, broad money supply, level of foreign reserves held by the Central Bank and interest rate differentials with trading partners can be used as good predictors of the long run Naira equilibrium real exchange rate. It is shown that the recent increases in the world price of oil have a significant appreciating effect in the real Naira rate, while increases in the money supply have the opposite impact. The study also uses the behavioural equilibrium exchange rate approach to identify the misalignments in the real Naira rate. Findings point out to the undervaluation of the Naira at the end of 2010.
{"title":"Real Exchange Rate Assessment for Nigeria: An Evaluation of Determinants, Strategies for Identification and Correction of Misalignments","authors":"Emre Ozsoz, M. Akinkunmi","doi":"10.1111/j.1753-0237.2011.00206.x","DOIUrl":"https://doi.org/10.1111/j.1753-0237.2011.00206.x","url":null,"abstract":"By using monthly data for the 2004–2010 period and a vector error correction model approach, this paper evaluates the determinants of real exchange rates for the Nigerian Naira. Estimations suggest that oil prices, broad money supply, level of foreign reserves held by the Central Bank and interest rate differentials with trading partners can be used as good predictors of the long run Naira equilibrium real exchange rate. It is shown that the recent increases in the world price of oil have a significant appreciating effect in the real Naira rate, while increases in the money supply have the opposite impact. The study also uses the behavioural equilibrium exchange rate approach to identify the misalignments in the real Naira rate. Findings point out to the undervaluation of the Naira at the end of 2010.","PeriodicalId":103205,"journal":{"name":"Wiley-Blackwell: OPEC Energy Review","volume":"21 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114848007","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2011-12-01DOI: 10.1111/j.1753-0237.2011.00192.x
O. Adeniyi, A. Oyinlola, Dr. Olusegun A. Omisakin
The impact of oil price shocks on the economy has occupied the attention of researchers for almost four decades. Majority of studies support the existence of a negative association, while some recent evidences seem to have popularised the view that outcomes are the artefacts of misspecified functional forms. This study, although similar in spirit to this popular opinion, is, however, distinct in a number of ways. Firstly, unlike most Nigeria‐specific studies, this paper explores alternative measures of oil price shocks, which have been developed and used in the literature with a view to ascertaining the extent to which conclusions about the oil price‐growth association depend on the definition of shocks adopted. More importantly, this, to the best of our knowledge, is a pioneer attempt at introducing threshold effects into the linkage between oil price shocks and output growth in Nigeria. The relatively recent regime‐dependent multivariate threshold autoregressive model, together with the characteristic impulse response functions and forecast error variance decomposition, is adopted in this study. Using quarterly data spanning 1985–2008, a non‐linear model of oil price shocks and economic growth is estimated. Our main results indicate that oil price shocks do not account for a significant proportion of observed movements in macroeconomic aggregates. This pattern persists despite the introduction of threshold effects. This implied the enclave nature of Nigeria's oil sector with weak linkages. Therefore, the need to spend oil revenue productively is imperative if favourable effect on real output growth is envisaged.
{"title":"Oil Price Shocks and Economic Growth in Nigeria: Are Thresholds Important?","authors":"O. Adeniyi, A. Oyinlola, Dr. Olusegun A. Omisakin","doi":"10.1111/j.1753-0237.2011.00192.x","DOIUrl":"https://doi.org/10.1111/j.1753-0237.2011.00192.x","url":null,"abstract":"The impact of oil price shocks on the economy has occupied the attention of researchers for almost four decades. Majority of studies support the existence of a negative association, while some recent evidences seem to have popularised the view that outcomes are the artefacts of misspecified functional forms. This study, although similar in spirit to this popular opinion, is, however, distinct in a number of ways. Firstly, unlike most Nigeria‐specific studies, this paper explores alternative measures of oil price shocks, which have been developed and used in the literature with a view to ascertaining the extent to which conclusions about the oil price‐growth association depend on the definition of shocks adopted. More importantly, this, to the best of our knowledge, is a pioneer attempt at introducing threshold effects into the linkage between oil price shocks and output growth in Nigeria. The relatively recent regime‐dependent multivariate threshold autoregressive model, together with the characteristic impulse response functions and forecast error variance decomposition, is adopted in this study. Using quarterly data spanning 1985–2008, a non‐linear model of oil price shocks and economic growth is estimated. Our main results indicate that oil price shocks do not account for a significant proportion of observed movements in macroeconomic aggregates. This pattern persists despite the introduction of threshold effects. This implied the enclave nature of Nigeria's oil sector with weak linkages. Therefore, the need to spend oil revenue productively is imperative if favourable effect on real output growth is envisaged.","PeriodicalId":103205,"journal":{"name":"Wiley-Blackwell: OPEC Energy Review","volume":"232 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125118356","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2011-12-01DOI: 10.1111/j.1753-0237.2011.00198.x
Usama Al-mulali, Che Normee Binti Che Sab
This study investigated the impact of oil shocks on the real exchange rate of the United Arab Emirates (UAE) dirham. Time series data were used for the period 1977–2007. Through this study, it has been found that a fixed exchange rate to the US dollar is not an appropriate exchange rate regime for the UAE. This is because when the price of oil increases, and with a fixed exchange rate regime, this would lead to rapid growth in gross domestic product and liquidity in the UAE economy. This, in turn, causes domestic prices to increase, and results in high levels of inflation.
{"title":"The Impact of Oil Prices on the Real Exchange Rate of the Dirham: A Case Study of the United Arab Emirates (UAE)","authors":"Usama Al-mulali, Che Normee Binti Che Sab","doi":"10.1111/j.1753-0237.2011.00198.x","DOIUrl":"https://doi.org/10.1111/j.1753-0237.2011.00198.x","url":null,"abstract":"This study investigated the impact of oil shocks on the real exchange rate of the United Arab Emirates (UAE) dirham. Time series data were used for the period 1977–2007. Through this study, it has been found that a fixed exchange rate to the US dollar is not an appropriate exchange rate regime for the UAE. This is because when the price of oil increases, and with a fixed exchange rate regime, this would lead to rapid growth in gross domestic product and liquidity in the UAE economy. This, in turn, causes domestic prices to increase, and results in high levels of inflation.","PeriodicalId":103205,"journal":{"name":"Wiley-Blackwell: OPEC Energy Review","volume":"47 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121773392","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2011-12-01DOI: 10.1111/j.1753-0237.2011.00201.x
Marko Melolinna
This paper studies the existence of risk premia in crude oil futures prices with simple regression and Bayesian VAR models. It also studies the importance of three main risk premia models in explaining and forecasting the risk premia in practice. Whilst the existence of the premia and the validity of the models can be established at certain time points, it turns out that the choice of sample period has a considerable effect on he results. Hence, the risk premia are highly timevarying. The study also establishes a model, based on speculative positions in the futures markets, which has some predictive power for future oil spot prices.
{"title":"What Explains Risk Premiums in Crude Oil Futures?","authors":"Marko Melolinna","doi":"10.1111/j.1753-0237.2011.00201.x","DOIUrl":"https://doi.org/10.1111/j.1753-0237.2011.00201.x","url":null,"abstract":"This paper studies the existence of risk premia in crude oil futures prices with simple regression and Bayesian VAR models. It also studies the importance of three main risk premia models in explaining and forecasting the risk premia in practice. Whilst the existence of the premia and the validity of the models can be established at certain time points, it turns out that the choice of sample period has a considerable effect on he results. Hence, the risk premia are highly timevarying. The study also establishes a model, based on speculative positions in the futures markets, which has some predictive power for future oil spot prices.","PeriodicalId":103205,"journal":{"name":"Wiley-Blackwell: OPEC Energy Review","volume":"6 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134512790","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2011-12-01DOI: 10.1111/j.1753-0237.2011.00197.x
C. Chaton, F. Hermon, Virginie Pignon
Market prices make it possible to realise returns on capital investments in the electricity sector, but these prices may not necessarily be politically or socially acceptable. As a result, explicit or implicit price caps may be established. If these caps are effective, they may result in loss of income and therefore discourage investors. To remedy this problem, several mechanisms have been proposed and put into place. The goal of this paper is not to perform an analysis of these initiator mechanisms for capital investment but, rather, to study an alternative. We show that this conceptually simple mechanism, which appears to correspond to the desires of producers and suppliers, is actually an illusion. Admittedly, the mechanism allows a single producer (or multiple producers with the same production mix) to recover its (their) costs despite the price cap. However, it does not allow certain technologies to be profitable. As a result, producers may be reluctant to invest in these technologies. This reluctance is more significant with the introduction of risk. The mechanism creates a distortion, moving money from peak to base technologies. Furthermore, it is not simple to implement.
{"title":"Proposal for a Simple Mechanism to Encourage Capital Investment in Electricity Generation Capacity: Illusion or Reality?","authors":"C. Chaton, F. Hermon, Virginie Pignon","doi":"10.1111/j.1753-0237.2011.00197.x","DOIUrl":"https://doi.org/10.1111/j.1753-0237.2011.00197.x","url":null,"abstract":"Market prices make it possible to realise returns on capital investments in the electricity sector, but these prices may not necessarily be politically or socially acceptable. As a result, explicit or implicit price caps may be established. If these caps are effective, they may result in loss of income and therefore discourage investors. To remedy this problem, several mechanisms have been proposed and put into place. The goal of this paper is not to perform an analysis of these initiator mechanisms for capital investment but, rather, to study an alternative. We show that this conceptually simple mechanism, which appears to correspond to the desires of producers and suppliers, is actually an illusion. Admittedly, the mechanism allows a single producer (or multiple producers with the same production mix) to recover its (their) costs despite the price cap. However, it does not allow certain technologies to be profitable. As a result, producers may be reluctant to invest in these technologies. This reluctance is more significant with the introduction of risk. The mechanism creates a distortion, moving money from peak to base technologies. Furthermore, it is not simple to implement.","PeriodicalId":103205,"journal":{"name":"Wiley-Blackwell: OPEC Energy Review","volume":"16 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116256164","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2011-12-01DOI: 10.1111/j.1753-0237.2011.00196.x
François Boye
It is conventional wisdom that Norway is the role model for oil-producing countries; its sensible policies and transparency in the management of its oil revenues have resulted in macroeconomic stability, which most oil producing countries from Africa and Latin America, hobbled by cycles of boom and bust or a Dutch disease, have always been denied. This paper does not take this conventional wisdom for granted given that the Norwegian government's fiscal policy has remained aligned with the cycles of the international oil market. To test whether the Norwegian economy is stable, this paper considers whether the famous 2001 stabilisation policy reform, meant to spread the spending of oil revenues over time, has ushered in a period of lower volatility in Norway. Its results are negative: (i) volatility in Norway's macroeconomic variables has increased after 2001; (ii) that the behaviour of either the Central Bank or the macroeconomy has changed after 2001 is not robust to modelling techniques; and (iii) had it been fully implemented, the 2001 stabilisation policy package would have had destabilising effects. In other words, Norway's volatility is not as insignificant as expected.
{"title":"Oil Revenues and Macroeconomic Volatility in Norway","authors":"François Boye","doi":"10.1111/j.1753-0237.2011.00196.x","DOIUrl":"https://doi.org/10.1111/j.1753-0237.2011.00196.x","url":null,"abstract":"It is conventional wisdom that Norway is the role model for oil-producing countries; its sensible policies and transparency in the management of its oil revenues have resulted in macroeconomic stability, which most oil producing countries from Africa and Latin America, hobbled by cycles of boom and bust or a Dutch disease, have always been denied. \u0000 \u0000 \u0000 \u0000This paper does not take this conventional wisdom for granted given that the Norwegian government's fiscal policy has remained aligned with the cycles of the international oil market. To test whether the Norwegian economy is stable, this paper considers whether the famous 2001 stabilisation policy reform, meant to spread the spending of oil revenues over time, has ushered in a period of lower volatility in Norway. Its results are negative: (i) volatility in Norway's macroeconomic variables has increased after 2001; (ii) that the behaviour of either the Central Bank or the macroeconomy has changed after 2001 is not robust to modelling techniques; and (iii) had it been fully implemented, the 2001 stabilisation policy package would have had destabilising effects. In other words, Norway's volatility is not as insignificant as expected.","PeriodicalId":103205,"journal":{"name":"Wiley-Blackwell: OPEC Energy Review","volume":"32 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131560552","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2011-06-01DOI: 10.1111/j.1753-0237.2011.00186.x
C. Chuku, Usenobong Akpan, Ndifreke R. Sam, Ekpeno L. Effiong
This paper pioneers research on the relationship between oil price shocks and current account dynamics in Nigeria, a country that doubles as an oil exporter and importer. Structural vector autoregression is applied to quarterly data from 1970Q1 to 2008Q4 to identify oil price shocks and to evaluate its net effect on Nigeria's current account balances. After introducing three control variables (output gap, real exchange rate misalignment and the lagged values of current account ratio), we impose six structural restrictions on the model to help track and identify the structural shocks of oil prices on current account balances. Overall, we find that oil price shocks have a significant short‐run effect on current account balances for Nigeria. Specifically, the impulse response of the current account ratio to oil price shocks increases speedily in the first six quarters, and then, it declines afterwards until the 30th quarter. The variance decomposition analysis shows that approximately 15.77 per cent of the variations in current account dynamics are caused by oil price shocks. The insight we draw from this finding is that there is no one‐for‐one relation between oil price shocks and current account dynamics. Exchange rate misalignment provides the offsetting effect as revealed from our results. The implication for policy is that reserve‐augmenting strategies, lax monetary policy and intensified international financial integration would need to be enhanced and sustained by policy‐makers to reinforce the positive effects of oil price shocks on the Nigerian economy.
{"title":"Oil Price Shocks and the Dynamics of Current Account Balances in Nigeria","authors":"C. Chuku, Usenobong Akpan, Ndifreke R. Sam, Ekpeno L. Effiong","doi":"10.1111/j.1753-0237.2011.00186.x","DOIUrl":"https://doi.org/10.1111/j.1753-0237.2011.00186.x","url":null,"abstract":"This paper pioneers research on the relationship between oil price shocks and current account dynamics in Nigeria, a country that doubles as an oil exporter and importer. Structural vector autoregression is applied to quarterly data from 1970Q1 to 2008Q4 to identify oil price shocks and to evaluate its net effect on Nigeria's current account balances. After introducing three control variables (output gap, real exchange rate misalignment and the lagged values of current account ratio), we impose six structural restrictions on the model to help track and identify the structural shocks of oil prices on current account balances. Overall, we find that oil price shocks have a significant short‐run effect on current account balances for Nigeria. Specifically, the impulse response of the current account ratio to oil price shocks increases speedily in the first six quarters, and then, it declines afterwards until the 30th quarter. The variance decomposition analysis shows that approximately 15.77 per cent of the variations in current account dynamics are caused by oil price shocks. The insight we draw from this finding is that there is no one‐for‐one relation between oil price shocks and current account dynamics. Exchange rate misalignment provides the offsetting effect as revealed from our results. The implication for policy is that reserve‐augmenting strategies, lax monetary policy and intensified international financial integration would need to be enhanced and sustained by policy‐makers to reinforce the positive effects of oil price shocks on the Nigerian economy.","PeriodicalId":103205,"journal":{"name":"Wiley-Blackwell: OPEC Energy Review","volume":"7 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123774210","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2011-03-14DOI: 10.1111/j.1753-0237.2010.00182.x
M. Mazraati
The international marine bunker demand faces many challenges with regard to regulation on fuel quality by the International Maritime Organization (IMO). This paper reviews the most recent challenges and evolutions related to fuel demand and development in international maritime transportation. By developing a simple recursive econometric model, the future demand is forecast under the no-policy change scenario. In the alternative scenario, the impacts of Annex VI of IMO's marine pollution convention on spread price between the high-sulphur and low-sulphur fuel oil are elaborated, and eventually, the impacts on future bunker demand are evaluated. The low price elasticity of bunker demand confirms minimal impacts on demand albeit considerable impacts on running cost of vessels. Bunker demand elasticity with regard to international maritime transportation is estimated at 0.55, showing that inevitable international transportation requirement is the key driver for bunker demand. Implementation of Annex VI would certainly change the mixture of bunker fuel, which mainly depends on the penetration of SO scrubbers on-board of vessels and/or fuel switching. However, due to discrepancy in the level of fuel consumption and uncertain mixture of bunker fuels in the future, the refinery sector and the international maritime transportation sector would face huge uncertainties.
{"title":"Challenges and Prospects of International Marine Bunker Fuels Demand","authors":"M. Mazraati","doi":"10.1111/j.1753-0237.2010.00182.x","DOIUrl":"https://doi.org/10.1111/j.1753-0237.2010.00182.x","url":null,"abstract":"The international marine bunker demand faces many challenges with regard to regulation on fuel quality by the International Maritime Organization (IMO). This paper reviews the most recent challenges and evolutions related to fuel demand and development in international maritime transportation. By developing a simple recursive econometric model, the future demand is forecast under the no-policy change scenario. In the alternative scenario, the impacts of Annex VI of IMO's marine pollution convention on spread price between the high-sulphur and low-sulphur fuel oil are elaborated, and eventually, the impacts on future bunker demand are evaluated. The low price elasticity of bunker demand confirms minimal impacts on demand albeit considerable impacts on running cost of vessels. Bunker demand elasticity with regard to international maritime transportation is estimated at 0.55, showing that inevitable international transportation requirement is the key driver for bunker demand. Implementation of Annex VI would certainly change the mixture of bunker fuel, which mainly depends on the penetration of SO scrubbers on-board of vessels and/or fuel switching. However, due to discrepancy in the level of fuel consumption and uncertain mixture of bunker fuels in the future, the refinery sector and the international maritime transportation sector would face huge uncertainties.","PeriodicalId":103205,"journal":{"name":"Wiley-Blackwell: OPEC Energy Review","volume":"111 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-03-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"117235959","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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