• Energy Research

Abstract We empirically examine the existence of an oil curse in the finance–growth nexus in Malaysia. We provide new insights into the oil curse phenomenon in Malaysia that challenges the conventional argument that Malaysia is a counter-example of an oil curse country. We do not find any significant evidence of direct effects of financial development on TFP. However, there are direct and positive effects on the level of investment due to financial development and oil dependence. While we do not find statistical evidence of a direct negative impact of oil rent on economic growth, our results reveal that the symptoms of an oil curse exist. Specifically, we find that oil rent has a weak, indirect, impact on the finance–growth nexus through the quantitative channel or investment quantity. The policy implications of our findings are that the financial sector should be more involved in productive investment activities that can strengthen its role in economic growth and that policymakers should reduce dependence on oil and promote economic diversification.

Previous studies that have tested for a unit root in aggregate energy consumption have potentially reached misleading conclusions because they fail to allow for the possibility that energy consumption might be fractionally integrated and do not distinguish between different types of energy consumption. This study tests for long memory in disaggregated petroleum consumption in the United States using univariate and multivariate Lagrange multiplier (LM) tests for fractional integration. The results point strongly to the need to distinguish between different forms of energy consumption and allow for a generalization of the I(0)/I(1) dichotomy when considering the order of integration of energy consumption. Allowing for short-run dynamics, the univariate test suggests that less than 50% of the series are fractionally integrated. Consistent with expectations the non-stationary series are found to have the highest mean and standard deviation. The multivariate test suggests that petroleum consumption in the commercial and industrial sectors is clearly fractionally integrated when allowing for short-run dynamics, and, as such, exhibits persistent effects, while petroleum consumption in the residential sector is a stationary process.

Abstract This paper is a survey of research on how oil prices affect stock returns. In the last couple of decades there has been an upsurge in such research, suggesting that a stock take is timely. The sheer volume of research on the interaction between oil markets and stock markets has meant that we have lost track of the key findings from the literature. The danger, in the absence of a stock take, is that we will produce a large volume of studies on how oil prices interact with stock returns without them having any real impact on the profession. This paper is a response to this concern. It highlights the key themes researched, main findings and, equally importantly, identifies key challenges and suggests an agenda for future research on the interaction between oil prices and stock returns and oil prices and the financial sector more generally.

Abstract Australia's diverse climate makes it vulnerable to cold winters and extremely warm summers, characterised by severe bushfires and heat waves. Thus, unlike most European countries, energy poverty in Australia is linked with difficulty both maintaining adequate warmth during winter and ensuring adequate cooling during summer. Energy poverty in Australia is, therefore, associated with cold-and-heat-related health issues. We draw on 13 waves of representative panel data for the Australian adult population to examine the relationship between energy poverty and self-assessed health. We use both objective and subjective indicators of energy poverty. We instrument for energy poverty using energy prices. When we instrument for energy poverty, we find that a standard deviation increase in energy poverty is associated with a decline in general health between 0.099 and 0.296 standard deviations. The finding that energy poverty lowers health is robust to different ways of measuring health and alternative methods to addressing endogeneity of energy poverty, including using internal instruments, dynamic panel methods and propensity score matching.

Abstract We examine the effect of player-transfers entered into by football clubs owned, or financed, by individuals who are key players in the oil market on abnormal returns in oil futures. In oil-financed football clubs, the sums expended buying players frequently far exceeds the amount received from selling players in the player-transfer market. We find that in order to finance these deficits in the player-transfer market, the owners act opportunistically by withholding the oil supply, resulting in higher abnormal oil spot returns. We also find that these spot price adjustments are reflected in abnormal returns in the futures market. The exception is when the deficit in the player-transfer market is above a very high threshold, which is typically only the case when the highest profile players in football are transferred. The high-profile transfers attract widespread media attention, making oil futures investors aware of the potential transmission from the player-transfer market to the oil market on a wide-scale, which dissipates the effect of a deficit in the player transfer market on abnormal returns in oil futures.

Abstract This article investigates whether uncompetitive pricing tactics are being employed in the retail petrol market in Australia through examining the effect of a change in daily oil prices on monthly petrol prices. To do so, we incorporate asymmetry into the coefficients of a normalised beta weighting function within an Asymmetric Mixed Data Sampling (AMIDAS) framework. This enables us to examine both the timing, and the lagged marginal effects, of a change in retail petrol prices in response to a change in the oil price. We find evidence of asymmetries in both the timing, and magnitude, of retail petrol prices to a change in the oil price. Specifically, we find that while price falls are slowly and symmetrically passed onto consumers, price increases are more delayed, but higher in intensity over time. Depending on the capital city, when retailers eventually do increase petrol prices, in response to an oil price rise with delay, the price rise is between 2.1 and 3.4 times more than when retailers reduce petrol prices in response to a fall in the price of oil. This finding is consistent with retailers delaying substantial petrol price rises in order to mask the existence of uncompetitive practices.

Abstract We examine whether heteroskedasticity in measurement errors improves the volatility forecasting ability of the Heterogenous Autoregressive (HAR) model in crude oil and biofuel feedstock markets. We also examine the incremental explanatory power of jumps and the investor fear gauge (IFG) over heteroskedasticity in measurement errors in improving the volatility forecasting ability of the HAR model in each of these markets. For the in-sample evaluation, we find that exploiting the heteroskedasticity of measurement errors in the HAR model improves the model's goodness of fit (measured by adjusted R2) by up to 10% depending on the market. IFG has a significant incremental role over heteroskedasticity in measurement errors in improving the fit of the HAR model in both the crude oil and biofuel feedstock markets, while jumps have a significant incremental role in improving the fit of the HAR model in the crude oil market, but not the biofuel feedstock markets. For the out-of-sample forecasts, including regime switching improves volatility predictions in the corn and wheat markets across all forecasting horizons, while for the soybean market, including regime switching improves the performance of multi-step volatility forecasts. In the out-of-sample forecasts the best ranked models almost always include heteroskedasticity of measurement error and IFG.

Abstract We examine the relationship between oil prices and economic policy uncertainty in G7 countries. To do so, we employ a nonparametric panel data technique that allows the trend and coefficient functions to evolve as unknown time-varying functional forms. We also estimate country-specific and common trend functions allowing them to evolve over time. Using monthly data from G7 countries over the period 1997:01–2018:06, we find that the effect of oil prices on economic policy uncertainty is time-varying. Our results show that the estimated time-varying coefficient function of the oil price was negative in years in which increases in oil prices were driven by a surge in global aggregate demand. Further, our nonparametric local linear estimates show that the country-specific and common trend functions are increasing over time. Our findings are robust to endogeneity and alternative specifications.

ABSTRACTWe test for convergence in disaggregated petroleum consumption at the sector level for the United States using the recently proposed GARCH unit root test, suitable for high frequency data. We find evidence of convergence for just over half of the series, including total petroleum consumption in each sector and approximately three quarters of the disaggregated petroleum consumption series in transportation.