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Examining Asymmetric Behavior in US Petroleum Futures and Spot Prices

Bradley T. Ewing, Shawkat M. Hammoudeh and Mark A. Thompson

Year: 2006
Volume: Volume 27
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol27-No3-2
View Abstract

Abstract:
This paper uses the momentum-threshold autoregressive (M-TAR) model to examine the possible asymmetric relationship between petroleum futures and spot prices for three different markets: crude oil, heating oil, and gasoline in the United States. The results indicate that the futures and spot prices for each petroleum type are cointegrated when allowing for asymmetric adjustment for each of these energy markets. We further investigate the asymmetric behavior between the futures and spot prices by estimating the M-TAR error-correction model. The M-TAR model allows us to document the adjustments that these markets undergo in response to changes in the basis.



Factors Affecting an Economy's Tolerance and Delay of Response to the Impact of a Positive Oil Price Shock

Bwo-Nung Huang

Year: 2008
Volume: Volume 29
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol29-No4-1
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Abstract:
This paper applies a multivariate threshold model to estimate a country�s threshold level of economic tolerance (c) and delay of response (d) to the impact of a positive price change and its shock. Regression analysis is employed to investigate the factors affecting c and d. We find: (1) as a country becomes more advanced in economic development and acquires a lower ratio of energy use in its industry and transportation sectors, the threshold of tolerance is greater as evidenced by the positive impact of an oil price change and its shock; (2) if a country has a lower ratio of energy use in the industry sector, a lower energy import ratio and is more advanced in economic development, it will have a longer delay; and (3) as an economy becomes more advanced, the length of the response time from the impact of the shock of an oil price change will be longer.



Asymmetric Adjustments in Oil and Metals Markets

Shawkat Hammoudeh, Li-Hsueh Chen and Bassam Fattouh

Year: 2010
Volume: Volume 31
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol31-No4-9
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Abstract:
Using the threshold cointegration methods, Enders-Siklos (2001) and Hansen-Seo (2002), this study finds that spot and futures prices in each of the four widely traded commodities, copper, gold, WTI oil and silver are asymmet�rically co-integrated. However, the asymmetric adjustment to the long-run equi�librium differs among those commodities, reflecting different profitable opportu�nities. The adjustment is faster for copper after positive shocks, while it is faster for the safe havens oil, gold and silver after negative shocks. It is more the spot and not the futures price for the four commodities that focuses in its adjustment on long-run factors. In sum, the adjustments imply different trading strategies, depending on whether the faster adjustment happened from above or below the threshold.



Dynamic Adjustment of Crude Oil Price Spreads

Atanu Ghoshray and Tatiana Trifonova

Year: 2014
Volume: Volume 35
Number: Number 1
DOI: 10.5547/01956574.35.1.7
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Abstract:
This paper examines the dynamic adjustment of crude oil price differentials formed by a wide range of popularly traded crude oils which include non-benchmark crudes of different quality. Recent studies have pointed out the fact that the adjustment of oil price spreads is asymmetric in nature. This paper makes a contribution in many ways. Employing econometric procedures that are more powerful than recently applied methods, and on a much wider selection of crude oil pairs than previous studies we establish that the results obtained for price differentials between benchmark crudes are not representative of the behaviour of non-benchmark pairs. Further, our results show that the adjustment of price differentials cannot be fully explained by the quality differentials which are commonly approximated by the difference in API gravity. Finally, we find that short run and long run dynamics do not show a pattern that could be linked to quality differentials.



The Informational Efficiency of European Natural Gas Hubs: Price Formation and Intertemporal Arbitrage

Sebastian Nick

Year: 2016
Volume: Volume 37
Number: Number 2
DOI: 10.5547/01956574.37.2.snic
View Abstract

Abstract:
In this study, the informational efficiency of the European natural gas market is analyzed by empirically investigating price formation and arbitrage efficiency between spot and futures markets. Econometric approaches accounting for nonlinearities induced by the low liquidity-framework and by technical constraints of the considered gas hubs are specified. The empirical results reveal that price discovery generally takes place on the futures market. Thus, the futures market seems to be more informationally efficient than the spot market. The theory of storage seems to hold at all hubs in the long run. There is empirical evidence of significant market frictions hampering intertemporal arbitrage. UK's NBP and Austria's CEGH seem to be the hubs at which arbitrage opportunities are exhausted most efficiently, although there is convergence in the degree of intertemporal arbitrage efficiency over time at the hubs investigated.



Electricity Sector Performance: A Panel Threshold Analysis

Michael L. Polemis and Thanasis Stengos

Year: 2017
Volume: Volume 38
Number: Number 3
DOI: 10.5547/01956574.38.3.mpol
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Abstract:
This paper introduces a panel threshold model to empirically estimate the main drivers of electricity performance. The empirical analysis is based on a panel data set including 30 OECD countries over the period 1975-2013. We argue that effective regulatory reforms have positive interaction with the electricity generated leading to a higher capacity utilization and an increase in the level of labor productivity of the sector. The threshold analysis suggests that for already economically liberalised countries the level of economic freedom does not affect electricity generation and subsequently the level of electricity performance. Finally, the results do not drastically change when the Renewable Energy Sources (RES) are taken into account.



Price Adjustments and Transaction Costs in the European Natural Gas Market

Rafael Garaffa, Alexandre Szklo, André F. P. Lucena, and José Gustavo Féres

Year: 2019
Volume: Volume 40
Number: Number 1
DOI: 10.5547/01956574.40.1.rgar
View Abstract

Abstract:
The presence of long-term contracts indexed to oil prices is a key feature of the evolution of the European natural gas industry. During the 2000's, the European Commission (EC) promoted reforms to establish a single and integrated natural gas market, leading to the development of short-term regional markets based on hubs. This paper tests the hypothesis that asymmetric price responses in the continental European hubs derive from transaction costs. By applying linear and nonlinear error correction models, it assesses the price transmission dynamics and the degree of integration between the German, the Belgium and the Dutch spot markets. The models identified cointegration relations, price asymmetries and transaction costs in these markets. Results show a high degree of integration across regions, with prices converging rapidly to their long-run equilibrium. However, asymmetric price adjustments reveal the presence of transaction costs in the German regional hub.



From Residential Energy Demand to Fuel Poverty: Income-induced Non-linearities in the Reactions of Households to Energy Price Fluctuations

Dorothee Charlier and Sondes Kahouli

Year: 2019
Volume: Volume 40
Number: Number 2
DOI: 10.5547/01956574.40.2.dcha
View Abstract

Abstract:
The residential energy demand is growing steadily and the trend is expected to continue in the near future. At the same time, under the impulse of economic crises and environmental and energy policies, many households have experienced reductions in real income and higher energy prices. In the residential sector, the number of fuel-poor households is thus expected to rise. A better understanding of the determinants of residential energy demand, in particular of the role of income and the sensitivity of households to changes in energy prices, is crucial in the context of recurrent debates on energy efficiency and fuel poverty. We propose a panel threshold regression (PTR) model to empirically test the sensitivity of French households to energy price fluctuations - as measured by the elasticity of residential heating energy prices - and to analyze the overlap between their income and fuel poverty profiles. The PTR model allows to test for the non-linear effect of income on the reactions of households to fluctuations in energy prices. Thus, it can identify specific regimes differing by their level of estimated price elasticities. Each regime represents an elasticity-homogeneous group of households. The number of these regimes is determined based on an endogenously PTR-fixed income threshold. Thereafter, we analyze the composition of the regimes (i.e. groups) to locate the dominant proportion of fuel-poor households and analyse their monetary poverty characteristics. Results show that, depending on the income level, we can identify two groups of households that react differently to residential energy price fluctuations and that fuel-poor households belong mostly to the group of households with the highest elasticity. By extension, results also show that income poverty does not necessarily mean fuel poverty. In terms of public policy, we suggest focusing on income heterogeneity by considering different groups of households separately when defining energy efficiency measures. We also suggest paying particular attention to targeting fuel-poor households by examining the overlap between fuel and income poverty.



The Threshold Role of FDI Flows in the Energy-Growth Nexus: An Endogenous Growth Perspective

Olayeni Olaolu Richard, Jemiluyi Olayemi Olufunmilayo, Aviral Kumar Tiwari, and Shawkat Hammoudeh

Year: 2023
Volume: Volume 44
Number: Number 5
DOI: 10.5547/01956574.44.4.oric
View Abstract

Abstract:
In this paper, we have investigated the implications of the threshold effect of changes in FDI inflows for the nexus between energy consumption and economic growth in eight under-researched sub-Saharan African countries for the period 1971–2016. The countries are Benin, Congo, Kenya, Nigeria, Senegal, South Africa, Sudan, and Zambia. Using the lag-augmented VAR (LAVAR) model (corrected for cross-sectional dependence), we develop an empirical framework tightly linked to the endogenous growth model that allows for a threshold effect of changes (strength and weakness) in FDI inflows on the nexus. Our findings show that the FDI inflows matter for the causal link between energy consumption and economic growth in some countries, although, for the cross-section as a whole, our bootstrap simulation supports the neutrality hypothesis. The overall results suggest that an energy demand policy, such as an energy conservation policy, should not cause any significant adverse side-effects to economic growth in those sub-Saharan African countries. Policy implications of the threshold effect for the nexus for individual sub-Saharan African countries are also provided.



How Does Industrial Intellectualization Affect Energy Intensity? Evidence from China

Haitao Wu, Ruohan Zhong, Zhen Wang, Yuanfeng Qu, Xiaodong Yang, and Yu Hao

Year: 2024
Volume: Volume 45
Number: Number 2
DOI: 10.5547/01956574.45.2.hawu
View Abstract

Abstract:
Since the 21st century, as the digital economy has flourished and the Fourth Industrial Revolution has deepened, emerging technologies have exerted a significant influence on social development, leading to the rapid informatization and digitalization of society. Therefore, in the digital age, industrial intellectualization and energy intensity may interact. In this study, an industrial intelligent system is constructed considering three aspects, and the relationship is explored between industrial intellectualization and energy intensity from 2006 to 2018 in China. Industrial intellectualization can effectively improve energy efficiency and thus restrain energy intensity with a significant lag effect. In addition, China's energy intensity is highly spatially autocorrelated and spatially agglomerated. The negative spatial spillover effect of industrial intellectualization on energy intensity is also of concern. Finally, the nonlinear effects of industrial intellectualization on energy intensity are comprehensively analyzed under different levels of economic growth, technological progress, industrial restructuring, educational progress, financial development, and environmental regulation.




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