ENERGY ECONOMICS REVIEW
Year:2007 | Volume:4 | Issue:12|Papers Count:7

This paper contains results of the first part of a study in which a Vector Auto-Regression (VAR)/vector Error Correction (VEC) model is developed and estimated to investigate dynamics of petroleum markets in OECD. Time series of the model comprises monthly data for the variables: demand for oil in OECD, WTI in real term as a benchmark oil price, industrial production in OECD as a proxy for income and commercial stocks of crude oil and oil products in OECD for the time period of January 1995 to March 2007. The detailed results of this empirical research are presented in different sections of the paper, nevertheless, the general result that emerges from this study could be summarized as follows: (i) There is convincing evidence of the series being non-stationary and integrated of order one 1(1) with clear signs of co-integration relations between the series. (ii) The VAR system of the empirical study appears stable and restore its dynamics as usual following a shock to the rate of changes of different variables of the model taking between 5 to 8 periods (months in our case). (iii) It appears that the null hypothesis of 'the expected mean of the series being insignificant from zero', cannot be rejected in 5% level for each of four time-series indicating lack of statistical proof for presence of the deterministic trend in time-series of concern, (iv) Normality tests and histograms of the series reveals that while distribution of the samples in level differ from theoretical normal distribution however this is not the case for the differenced time series and for the residuals, on the other hand autocorrelation functions of the series are consistent with unit root process .(v) We find the lag length of 2 as being optimal for the estimated VAR model. (vi), Significant impact of changes in the commercial crude and products' inventory level on oil price and on demand for oil is highlighted in our empirical study and in different formulations of the VAR model indicating importance of changes in stocks' level on oil market dynamics. (vii) Income elasticity of demand for oil appear to be prominent and statistically significant in most estimated models of the VAR system, while price elasticity of demand for oil is found to be negligible and insignificant in the short-run.

Volume of gasoline consumed in Iran is determined by such different factors as gasoline price as well as efficiency, age, and number of cars -in use among many other structural and cultural variables. This paper considers the average age and efficiency of cars and gasoline demand mo4els.' as a function of the age, efficiency, price and other explanatory variables to prove that although renovation of the fleet could have positive impact on fuel saving, it is yet to be the most effective approach. It also shows that mandatory efficiency standards for car .manufactures and imported cars like the CAFE standards in US, could lead to improved efficiency of car fleet, where lower cost within a shorter Period of time are incurred, The shorten n efficiency elasticity of gasoline demand is -3.5 which proves the above mentioned hypothesis. One percent increase in the efficiency of the fleet would lead to about 3.5 percent decrease in gasoline demand in the short run. Denoting a considerable. fuel saving. The short term price elasticity of gasoline demand is estimated at -0.17 demonstrating insignificant response of demand to price in short term although a higher impact can be envisaged in long term. The car age and elasticity of gasoline demand by the fleet of cars are estimated at 0.16 and 0.43 respectively. The elasticity of the number of cars is less than unit but it is still considerable and indicates the considerable impacts of growing size of the fleet on fuel demand. The current development of the fleet size is indicative of a dramatic rise in the number of registered cars which in turn translates to sharp increase in gasoline demand in the future. The paper concludes that in order to get better results, such measures as rationalizing gasoline prices, decreasing average lifetime of car fleet, enforcing the CAFE standards to improve the efficiency of cars, levying higher taxes on old cars, scrapping down the old vehicles among other policies should be considered as a part of general policy.

In recent decades, volatility of oil prices has led to such consequences as macroeconomic turbulences. Most of the researches look at the matter from oil importer's point of view while oil producers are usually neglected. This paper explains the relationship between oil price shocks and economic growth and inflation by the econometric methods like VAR model and OLS regression. Based on quarterly data, an unrestricted autoregressive model is estimated in order to gauge short run effects of oil shocks on different variables such as exchange rate, money, government expenditure, inflation and GDP. Long run effects are also measured by the aid of a co-integration autoregressive model. Impulse-response technique is used to estimate reaction of aforementioned variables to different shocks. At the end, the paper proposes the economic policies based on statistical results.

The recent oil market conditions, have confronted analysts with serious challenges in their efforts to analyze oil price trends and the reasons behind them. They have, so far, addressed the issue on the basis of structural changes, periodical behavior and speculation. The roots of those challenges, in their view, are embedded in the influential development of fundamental elements on the price of oil. OPEC's oil production in the 1990s, is a case in point, which materialized the organization's price objectives very effectively. The organization, however, has lost its price controlling mechanisms and capabilities in recent years. The relationship of crude oil prices and commercial stock pilings has also reversed. This study reviews changes in the fundamental factors on the basis of econometric models. According to results, OPEC's excess or surplus production capacity in recent years (post 2003) has affected the relationship of oil stock pilings and prices. OPEC's surplus production capacity had no impact on oil prices prior to 2003, when it began to demonstrate its influence. Thus, OPEC which set its members' production quotas in light of stockpiling levels, in its pursuit of price objectives, is presently influencing the oil market with its excess capacity.Therefore, through its quota setting mechanism, OPEC is facing two opposing effects of the changing stock-levels and the surplus capacity, and currently the role of the second is superiora.

Hegelian process of change dictates that when entity (thesis) is transformed into its opposite (antithesis), the combination would be resolved in a higher form (Synthesis). It seems that global liquefied natural gas industry is undergoing such a process. The process of restructuring traditional monopoly in LNG industry materialized by market liberalization and privatization requires a new form of structure that benefits from competitive markets. This paper discusses the probable impacts of liberalization on the future developments of LNG industry. The paper also examines the probability that whether Hegel's invisible hand would be able to transform the traditional monopoly in LNG industry into the restructured one involving viable competitive markets.

Oil refining is a joint production system because the production of one oil product makes technically inevitable the production of other oil products. Due to the complex nature of the process involved and the vast number of joint product outputs that are strongly correlated, it is very difficult to establish any meaningful CO2 emissions allocation between oil products. Nevertheless, the allocation of petroleum refinery energy use and the resultant CO2emissions among different oil products is necessary in "well to wheel" analysis in order to evaluate the environmental impacts of individual transportation fuels.In practice, allocation methods used so far for the petroleum based fuel are traditionally based on two fundamental approaches: physical 'measures (mass, volume, energy contents or other relevant parameters) or market value of individual oil products from a given refinery. These methods are open to discussion on two points. Fist, an a priori assumption about the allocation procedure (i.e., mass, volume, energy contents, market value, etc.) is in some ways completely arbitrary and consequently of little use for economic decision making purposes. Second, these approaches ignore the opportunity cost effects and the interdependencies which might exist among the refinery process units, and systematically assign more emissions to the oil products that utilize more process units.More sophisticated proposals to energy consumption and emissions allocation have been developed based on the concept of duality in linear programming (LP). Unfortunately, in refinery LP models constraints on (fixed) unit process capacities or input availabilities might destroy the additivity property of the marginal based allocations. In fact, due to a technical feature inherent in LP, the petroleum product allocation coefficients might underestimate or overestimate the total volume of the refinery's CO2 emissions. This handicap is a valid objection to LP as an allocation tool in retrospective or accounting LCA studies and might limit its use for problems in which the objective is to assign unambiguously the whole refinery's emissions among the oil products. This practice-oriented paper is aimed to provide a two-stage procedure, based on LP, to fully allocate the refinery's CO2emissions among the refinery's petroleum joint products. The procedure is applied to the IFP (Institut FranÇais du Pétrole) oil refinery. The average contribution of petroleum oil products to the refinery's CO2 emissions are then compared with the other accounting allocation methods. We show that, contrary to these latter, gasoline has not always a higher average CO2 content than that of diesel within the European refineries.