ENERGY ECONOMICS REVIEW
Year:2009 | Volume:6 | Issue:22|Papers Count:7

Crude oil is the main input for refined products and as a result its price has a major impact on oil product prices. Consequently, crude oil price fluctuations can have very significant effect on the price of refined products and there is a constant flow of information between the two markets. There have been a number of studies examining causal links between the price of crude oil and products (mainly gasoline, heating oil, and gasoil). Linear causality tests and vector-error correction tests indicate that causality (and long-run causality) runs from crude to products prices. There are deep spot and future markets in crude and refined products and the relationship between the first moments of their respective prices can be seen in the context of asset market information flows. Traditionally, the empirical studies examined causality in the mean level of prices. In this paper, we examine the information transmission mechanism, i.e. the causal relationship between prices of WTI-N.Y. Gasoline and Brent-Gasoil using weekly data during the 1987-2008. Our findings, based on bi-variate error correction test and Toda-Yamamoto (1995), confirm previous results indicating that long-run causality for the mean runs from crude to refined products prices for the whole sample period. However, following the substantial decline in gasoline stocks in the USA in 2003 and gasoil stocks in Europe in 2004, we find that due to a structural change in the market there is a reversal in the direction of long-run causality in the European market during Jan 2004-July 2008, while there is no change in the direction of causality in the USA market in this period. However, information transmission flows between the two markets indicate that it is information from the crude oil market that dominate the refined products markets.

This paper considers the nonlinear effect of oil revenues on economic growth by applying the threshold error correction model and using data for the period 1338-1386 in Iran. The study finds that the pass through of increases in oil revenues to economic growth becomes weaker as the rate of increase of revenues goes up. The limit rate of increase in oil revenues, beyond which it loses its positive impact on GDP growth, is 37 per cent. In addition, the lower the rate of increase in oil revenues the greater its impact on GDP growth, indicating an inverse U-shaped relationship between the two variables. The above results confirm the existence of a resource curse characterized by rent seeking behavior and reductions in productivity, particularly during periods of high growth in oil revenues.

This paper examines the time series econometric relationship between the natural gas commercial price in the USA and OPEC basket price of crude oil, taking into account the total natural gas consumption in the USA. The two markets closely resemble each other due to substitution possibilities between them. This paper applies the Vector Auto Regression method to the relationship amongst the following three variables: PEC crude oil prices, commercial price of natural gas in the USA and total industrial and household consumption of natural gas in the USA. This paper uses monthly data from January 2001 to February 2009. We find a co integrating relationship between these time series which means the regression is not spurious. The dynamic relationship suggests that a shock of I percent in the long term OPEC oil price basket will lead to a 4 percent change in the price of natural gas. In addition, for every 100000units change in total gas consumption there will be a 0.443 units change in the price of natural gas.

This paper focuses on the residential sector demand for electricity, natural gas and petroleum products (Kerosene, gas oil and LPG) in Iran using a popular locally flexible functional form-"the Almost Ideal Demand System (AIDS)" We provide a policy perspective, using time series data set from 1971to 2005 (a total of 35 observations) and parameter estimates and a full set of elasticities (price, income and Allen & Morishima elasticities).Our results indicate that the Almost Ideal Demand System (AIDS) parameter estimates are meaningful and have theoretically acceptable directions. The income elasticities are all positive. The own-price elasticities are all negative, and indicate that the demands for electricity and natural gas are elastic and the demand for petroleum products is less elastic. The estimates of both the Allen and Morishima elasticities indicate that different sources of energy are Morishima substitutes.

Crude oil can be considered an engine of economic growth in the post Second World War era. In addition, given the economic supremacy of the USA, the US dollar has been used for invoicing crude oil transactions throughout the world. The two economic indicators of crude oil price and US dollar exchange rate and their fluctuations have a noteworthy effect on all countries, especially Iran. This article examines the long and short-run relationship between these variables. We apply the two methods of Johansen-Joselius and ARDL in order to rigorously study these relationships, using seasonal average prices of crude oil and effective exchange rates of the US dollar for the period 1975 to 2008. According to our results, there is long run co-integration relation between real crude oil price and real effective exchange rate of the US dollar, but this relationship is at a low level of statistical confidence. Also in the long-run, causality runs from real price of crude oil to real effective Exchange rate of dollar and not vice-versa. In short-run, real effective exchange rate of dollar has stationary but gradually behavior in opposition to various shocks that deviate from its long-run path.

Oil prices increased in a marked manner between 2000 and 2008, from $27.6 to 140 $ per barrel, demonstrating high price volatility. The increase in International oil prices has led to greater attention to differences amongst various forms of oil contracts, notably between production sharing and buys back arrangements. Many researchers have investigated and compared different contract modalities in terms of distribution of benefits between host governments and contracting companies. The current study poses a different question and seeks to find out which contract modality would be preferred by host governments and international oil companies, based on their respective expectations of future oil prices.This study undertakes a comparative assessment of various contracts for upstream oil operations, particularly the production sharing and buy back arrangements from the perspective of division of receipts between international oil companies and host governments. The study further investigates how different price trends influence these respective shares.

One of the issues in natural gas exports is appropriate pricing given competitive market conditions. One possible method for the study of the behavior of suppliers in the market is Game Theory. This paper attempts to study the West European natural gas market using a Game Theory approach. Here, we use the logical relations within the game matrix of a pricing strategy, between Russia (as the biggest competitor for Iran in the European natural gas market) and her competitors with the assumption that Iran will have the same behavior as other competitors, in order to construct the model using panel data. Based on this model, we performed a sensitivity analysis and concluded that so long as the difference between natural gas price of Iran and Russia is more than 2.6$ per Cubic Meter, Russia will not demonstrate any marked reaction thus allowing these competitors to protect their market shares.