The analyses of Crude Oil and Natural Gas Prices on Petrochemicals Products: A Case Study of IRAN's Methanol

Delavari, Majid and Gandali Alikhani, Nadiya and Naderi, Esmaeil (2012): The analyses of Crude Oil and Natural Gas Prices on Petrochemicals Products: A Case Study of IRAN's Methanol.

Abstract

Examining energy as a strategic commodity in the world and analysis of the effect of changes in its price on key economic factors has been always considered as significant. The importance of this issue is twofold in Iran: first, policies in this country, as one of the great possessors of energy resources in the world, affects not only the price of domestic and foreign oil products but also other economic variables. On the other hand, for different reasons such as oil price volatilities and income from oil export, economic planners and policy makers in Iran have been mainly focused on the promotion of non-oil exports especially during the last few decades. Therefore, methanol as one of the most commonly used petrochemical products has a high potential for production and export of non-oil products in Iran. For this reason, in the present study there was an attempt to examine the relationship between the prices of Iran’s crude oil, natural gas, and methanol using IGARCH model and based on the weekly time series data related to the research variables. The results of the study showed that the shocks caused by the price of crude oil and natural gas to the price of methanol were lasting and meaningful and were revealed in the long term.

• Item Type: MPRA Paper
• Language: English
• Keywords: Methanol Price, Natural Gas Price, Crude Oil Price, IGARCH Model.
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C13 - Estimation: General; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q43 - Energy and the Macroeconomy

References

1. Adrangi. B., Chatratha, A., Raffieeb, K., Ripplec, R.D., (2001); Alaska North Slope Crude Oil Price And The Behavior Of Diesel Prices In California, Energy Economics, Vol. 23, PP. 29-42.

2. Arouri, M., Lahiani, A., Nguyen, D.K., (2010), Forecasting the Conditional Volatility of Oil Spot and Futures Prices with Structural Breaks and Long Memory Models, International Conference on Economic Modeling, July, (Istanbul, Turkey).

3. Bachmeier, L.J., Grin, J.M., (2006); Testing For Market Integration: Crude Oil, Coal, and Natural Gas, The Energy Journal, Vol. 27, No. 2, PP. 55-72.

4. Barbiroli, G., (2002); Sustainable Economic Systems, Principles of Sustainable Development, Vol. I, PP. 1-10.

5. Bashiri Behmiri, N., Manso, J.R.P., (2012); Does Portuguese Economy Support Crude Oil Conservation Hypothesis?, Energy Policy, Vol. 45, PP. 628-634.

6. Bollerslev. T., (1986), Generalized Autoregressive Conditional HeteroScedasticity, Journal of Econometrics, Vol. 31, No. 3, PP. 307-327.

7. Engle. R. F., (1982), Autoregressive Conditional Heteroskedadticity with Estimates of the Variance of UK Inflation, Econometrica, Vol. 50, No. 4, PP. 987-1008.

8. Farzanegan, M.R., (2011); Oil Revenue Shocks And Government Spending Behavior In Iran, Energy Economics, Vol. 33, PP. 1055–1069.

9. Ghosh, S., (2011); Examining Crude Oil Price–Exchange Rate Nexus For India During The Period Of Extreme Oil Price Volatility, Applied Energy, Vol. 88, Issue. 5, PP. 1886-1889.

10. He, Y., Wang, SH., Lai, K.K., (2010); Global Economic Activity And Crude Oil Prices: A Cointegration Analysis, Energy Economics, Vol. 32, Issue. 4, PP. 868-876.

11. Honarvar, A., (2009); Asymmetry in Retail Gasoline And Crude Oil Price Movements In The United States: An Application Of Hidden Cointegration Technique, Energy Economics, Vol. 31, PP. 395-402.

12. Ji, Q., (2011); System Analysis Approach For The Identification Of Factors Driving Crude Oil Prices, Computers & Industrial Engineering, In Press, Corrected Proof, Available Online.

13. Joets, M, Mignon, V., (2011); On The Link Between Forward Energy Prices: A Nonlinear Panel Cointegration Approach, Universities De Paris Ouest Nanterre La Defense, No. 7235, PP. 1-16.

14. Kang, S.H., Cheong, C., Yoon, S.M., (2011), Structural Changes and Volatility Transmission in Crude Oil Markets, Physica A, Vol. 390, PP. 4317–4324.

15. Klett, T.R., Gautier, D.L., Ahlbrandt, T.S., (2007); An Evaluation Of The USGS World Petroleum Assessment 2000—Supporting Data, Science For A Changing World, Vol. 1021, PP. 1-9.

16. Komijani, A., Alikhani, N.G., Naderi, E., (2013), "The Long-run and Short-run Effects of Crude Oil Price on Methanol Market in Iran", International Journal of Energy Economics and Policy, Vol. 3, No. 1, pp. 43-50.

17. Lissek, U., Muller, J., (2012), "The Benefits of Natural Gas", Nord Stream (The new gas supply route for Europe) Working Paper, December, PP. 1-5.

18. Liu, G., Williams, R.H., Larson, E.D., Kreutz, T.G., (2011); Design/Economics of Low-Carbon Power Generation from Natural Gas and Biomass With Synthetic Fuels Co-Production, Energy Procedia, Vol. 4, PP. 1989-1996.

19. Liu, M.H., Margaritis, D., Tourani-Rad, A., (2010); Is There an Asymmetry in the Response of Diesel and Petrol Prices to Crude Oil Price Changes? Evidence from New Zealand, Energy Economics, Vol. 32, Issue. 4, PP. 926-932.

20. Masih, M., Algahtani, I., Demello, L., (2010 A); Price Dynamics of Crude Oil and the Regional Ethylene Markets, Energy Economics, Vol 38, PP. 1435-1444.

21. Masih, M., Albinali, K., Demello, L., (2010 B); Price Dynamics of Natural Gas And The Regional Methanol Markets, Energy Policy, Vol 38, PP. 1372–1378.

22. Methanex, November (2011); Methanex Investor Presentation, A Respansible Care Company.

23. Nexant, November (2009); Methanol Strategic Business Analysis, Chemsystems.

24. Olivier, J.G.J. Janssens-Maenhout, G., Peters, J.A.H.W., (2012), "Trends in Global CO2 Emissions", PBL Netherlands Environmental Assessment Agency, No. (500114022), PP. 6-39.

25. Ou, B., Zhang, X., Wang, Sh., (2012); How Does China’s Macro-Economy Response To The World Crude Oil Price Shock: A Structural Dynamic Factor Model Approach, Computers & Industrial Engineering, In Press, Accepted Manuscript, Available Online.

26. Ramberg, D.J., Parsons, J.E., (2011); the Weak Tie Between Natural Gas And Oil Prices, MIT Center For Energy And Environmental Policy Research, Cambridge, No. E19-411, PP. 1-24.

27. Rosthal. J. E., (2010); The Relationship Between Crude Oil And Natural Gas Prices And Its Effect On Demand, A Thesis Submitted In Partial Fulfillment Of The Requirements For The Degree Doctor Of Philosophy.

28. Schroder, M., Ekins, P., Power, A., Zulauf, M., Lowe, R., (2011), "The Kfw Experience In The Reduction Of Energy Use In And Co2 Emissions From Buildings: Operation, Impacts And Lessons For The Uk", Ucl Energy Institute And Lse Housing And Communities Working Paper, November, PP. 1-77.

29. Stephen P.A., Brown, M., Yucel, K., (2008); What Drives Natural Gas Prices? , The Energy Journal, Vol. 29, No. 2, PP. 43-58.

30. Takaendesa, P., (2006); The Behaviour And Fundamental Determinants Of The Real Exchange Rate In South Africa, Rhodes University, Masters In Commerce (Financial Markets).

31. Vo, M., (2011), Oil and Stock Market Volatility: A Multivariate Stochastic Volatility Perspective, Energy Economics, Vol. 33, PP. 956–965.

32. Vora, B., Chen, J.Q., Bozzano, A., Glover, B., Barger, P., (2009); Various Routes To Methane Utilization—SAPO-34 Catalysis Offers The Best Option, Catalysis Today, Vol. 141, PP. 77–83.

33. Ziramba, E., (2010); Price and Income Elasticities of Crude Oil Import Demand in South Africa: A Cointegration Analysis, Energy Policy, Vol. 38, Issue. 12, PP. 7844-7849.