• Environmental and Resource Economics Review
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• v.21 no.1
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• pp.69-92
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• 2012

This paper analyzed price asymmetry of domestic petroleum products by distribution stage. Analyzing the asymmetry by distribution stage, we can investigate the gap between analysis results and consumers' perception. For the first stage, we analyzed asymmetries between retail prices including tax and the spot prices of crude oil. The results show that retail price increases more quickly in response to the crude oil prices rise than to the crude oil prices fall as consumers' perception. For the second stage, we analyzed asymmetry of international petroleum product prices in Korean Won with the change in the crude oil spot prices. The results show that international petroleum product prices increase higher in response to the crude oil prices increase than to the crude oil prices decrease. For the final stage, we examined the asymmetry of wholesale price and retail price with the change in the international petroleum product prices in Korean Won. The results show that wholesale prices increase more quickly in response to the crude oil prices rise than to the international petroleum product prices fall. The retail prices, however, decrease more quickly in response to the crude oil prices fall than to the international petroleum product prices rise.

• The Journal of Asian Finance, Economics and Business
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• v.7 no.12
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• pp.123-129
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• 2020

This scholarly work is an effort to capture the effects of oil prices on the actual exchange rate between dollar and rupee. This is done with reference to the U.S. dollar as oil prices are marked in USD (U.S. Dollar) in the international market, and India is among the top five importers of oil. Using monthly data from January 2001 to May 2020. The study used the real GDP, money supply, short-term interest rate difference between two countries, and inflation apart from the crude oil prices per barrel as the factors that help define the exchange rate. The analysis, through cointegration and vector error correction method (VECM), suggests long and short-run causality amid prices of oil and the rate of exchange fluctuations. Oil prices are found to be negatively related to the exchange rate in the long term but positively related in the short term. The result of the Wald test also indicates the short-run causation from the short-term interest rate and the prices of crude oil towards the exchange rate. The present study shows that oil prices are evidence of the existence of short-term and long-term driving associations with short-term interest rates and exchange rates.

• The Journal of Fisheries Business Administration
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• v.32 no.1
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• pp.15-39
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• 2001

The study, using the input-output analysis of 402 industrial sectors by Bank of Korea(BOK) and the resulting outcomes of price model, aims to evaluate the spillover effects the international fluctuations in crude oil prices have on the commodities prices and consequently, analyse the management and profitability of the offshore fisheries in Korea. At present, the fisher men are provided with tax-free oils for their fishing operations as specified under the Special Tax Treatment Control Law. However, the exhaustion of marine resources and new international fisheries agreements, which resulted in the loss of fishing grounds, made the stable catch even more unpredictable and the hike in the price of the international crude oil would have adverse effects on the fishing industry. The study revealed that the increasing rise in the price of crude oil would exert sweeping spillover effects on other industry sectors in general and accordingly, lead to a poorer performance by fisheries. The price spillover coefficients for the diesel oil was 0.6026, which would translate into the 42.6% increase in the prices of oil when the increase ratio of 73.3% for the base crude oil was applied based on the calculation methods employed in the study. This in turn increased the ratio of diesel oil required in the offshore fisheries from 23.3% to 16.6%, diminishing the ratio of current net profits to minus 2.0% from 4.2% otherwise. By fishing type, the Pair Trawl suffered current net profits loss most by ratio of minus 9.4% and other fisheries such as Coastal Stow Nets, Coastal Angling, Danish Sein also suffered ratio of 7% and more in the loss of current net profits. With the deteriorating fishing performance, coupled with the increasing international crude oil prices, it is urgently required that the authorities concerned deliberate in depth on such schemes as follows in efforts to secure stable fishing production. First, provision of large-scale storage facilities for oil is needed to timely adapt to the fluctuations in international crude oil prices. Secondly, in line with the stabilization of tax-free oil prices, duty levied on oils for fishing and tax collected from the refineries need to be tax-exempt. Thirdly, the beneficiaries from the provision of tax-free oil should be broadened, not limited to special fishing operation only. Fourth, investment in stabilization of the oil prices should be encouraged, possibly through funding from the formation of fisheries development funds underway.

• Journal of Korea Port Economic Association
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• v.34 no.4
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• pp.125-140
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• 2018

This study uses daily price data on three major types of crude oil (Brent, Dubai, and WTI) and BDI from January 2, 2009 to June 29, 2018, to compare the relationship between crude oil prices and BDI for rate of change and volatility. Unlike previous studies, the correlation between BDI and crude oil prices was analyzed both the rate of change and variability, VARs, Granger Causality Test, and the GARCH and DCC models were employed. The correlation analysis, indicated that the crude oil price change rate and volatility affect the BDI change rate and that BDI volatility affects the crude oil price change rate and volatility. The relationship between oil prices and BDI is identified, but their correlation is low, which is likely a result of lower dependence on crude oil as demand for natural gas increases worldwide and demand for renewable energy decreases. These trends could result in lower correlations over time. Therefore, focusing on the changing demand for raw materials in future investments in international shipping(real economy) and oil markets and macroeconomic analysis is necessary.

• Environmental and Resource Economics Review
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• v.14 no.1
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• pp.201-220
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• 2005

Recently, we have been witnessing new records of crude oil price hikes. One question which naturally arises would be the possibility and accuracy of forecasting crude oil prices. This study tries to answer the relative predictability of futures prices compared to the forecasts based on experts system. Using WTI crude oil spot and futures prices, this study performs simple statistical comparisons in forecasting accuracy and a formal test of differences in forecasting errors. According to statistical results, WTI crude oil futures market turns out to be equally efficient relative to EIA experts system. Consequently, WTI crude oil futures market could be utilized as a market-based tool for price forecasting and/or resource allocation for both of petroleum producers and consumers.

• Asia-Pacific Journal of Business
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• v.11 no.3
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• pp.243-260
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• 2020

Purpose - This paper aims to investigate the properties of crude oil based derivative security (DLS) focusing on step-down type for comprehensive understanding of its risk. Design/methodology/approach - Kernel estimation is conducted to figure out statistical feature of the process of oil price. We simulate oil price paths based on kernel estimation results and derive probabilities of hitting the barrier and early redemption. Findings - The amount of issuance for crude oil based DLS is relatively low when base prices are below $40 while it is high when base prices are around $60 or $100, which is not consistent with kernel estimation results showing that oil futures prices tend to revert toward $46.14 and the mean-reverting speed is faster as oil price is lower. The analysis based on simulated oil price paths reveals that probability of early redemption is below 50% for DLS with high base prices and the ratio of the probability of early redemption to the probability of hitting barrier is remarkably low compared to the case for DLS with low base prices, as the chance of early redemption is deferred. Research implications or Originality - Empirical results imply that the level of the base price is a crucial factor of the risk for DLS, thus introducing a time-varying knock-in barrier, which is similar to adjust the base price, merits consideration to enhance protection for DLS investors.

• Environmental and Resource Economics Review
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• v.19 no.3
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• pp.485-508
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• 2010

This paper examines the long memory property and investigates cointegration in the dynamics of crude oil markets. For these purposes, we apply the joint ARMA-FIAPARCH model with structural break and the vector error correction model (VECM) to three daily crude oil prices: Brent, Dubai and West Texas Intermediate (WTI). In all crude oil markets, the property of long memory exists in their volatility, and the ARMA-FIAPARCH model adequately captures this long memory property. In addition, the results of the cointegration test and VECM estimation indicate a bi-directional relationship between returns and the conditional variance of crude oil prices. This finding implies that the dynamics of returns affect volatility, and vice versa. These findings can be utilized for improving the understanding of the dynamics of crude oil prices and forecasting market risk for buyers and sellers in crude oil markets.

• Environmental and Resource Economics Review
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• v.26 no.4
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• pp.499-517
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• 2017

The purpose of this article is to show profit margin hedging can be an optimal strategy in crude oil purchasing. This study theoretically analyzes profit margin hedging strategy is optimal in crude oil purchasing using expected target utility function and conducts simulations to show if the profit margin hedging is profitable. In addition, this study tests existence of mean reversion of crude oil futures prices to confirm the theory that profit margin hedging is more profitable than other strategies, such as always hedging or buying at expiration with spot price, if futures prices are mean reverting. The simulation results show that the expected utility of profit margin hedging higher than other strategies. Although we cannot find any evidence that crude oil futures prices follow mean reverting process, we can conclude that profit margin hedging can be optimal strategy in crude oil purchasing based on theoretical proof and simulation results.

• Journal of the Korea Academia-Industrial cooperation Society
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• v.17 no.4
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• pp.663-670
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• 2016

This paper analyzes the asymmetric pass-through effects of crude oil price changes on export prices in Korea's manufacturing sector using a nonlinear autoregressive distributed lag (NARDL) model. These pass-through effects are important for Korean companies that are highly dependent on exports. Because the effects differ by industry, eight sectors of the manufacturing industry were examined. The model is effective for separately testing the long-term and short-term differences between the export-price pass-through effects when crude oil prices increase and decrease. The estimation results show that there is positive pass-through to export prices as crude oil prices change, and there are asymmetric effects in some manufacturing sectors. Short-term asymmetries were detected in the export prices of five sectors that include general machinery and transport equipment, and significant long-term asymmetries were found for petroleum and coal products and for textile and leather products. The long-term export price of oil and coal products rose by 0.992% with a 1% increase in the oil price and fell by 0.977% with 1% decrease. Therefore, corporate strategies and government export policies should be established in accordance with these asymmetric pass-through effects.

• Journal of Navigation and Port Research
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• v.46 no.3
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• pp.289-296
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• 2022

The purpose of this study was to investigate the inter-correlation between crude oil prices and Dry Bulk Freight rates. Eco-friendly shipping fuels has being actively developed to reduce carbon emission. However, carbon neutrality will take longer than anticipated in terms of the present development process. Because of OVID-19 and the Russian invasion of Ukraine, crude oil price fluctuation has been exacerbated. So we must examine the impact on Dry Bulk Freight rates the oil prices have had, because oil prices play a major role in shipping fuels. By using the VAR (Vector Autoregressive) model with monthly data of crude oil prices (Brent, Dubai and WTI) and Dry Bulk Freight rates (BDI, BCI and (BP I) 2008.10~2022.02, the empirical analysis documents that the oil prices have an impact on Dry bulk Freight rates. From the analysis of the forecast error variance decomposition, WTI has the largest explanatory relationship with the BDI and Dubai ranks seoond, Brent ranks third. In conclusion, WTI and Dubai have the largest impact on the BDI, while there are some differences according to the ship-type.