Crude oil desulfurization

High sulfur crude oil is desulfurized by a low temperature (25-80 C.) chlorinolysis at ambient pressure in the absence of organic solvent or diluent but in the presence of water (water/oil=0.3) followed by a water and caustic wash to remove sulfur and chlorine containing reaction products. The process described can be practiced at a well site for the recovery of desulfurized oil used to generate steam for injection into the well for enhanced oil recovery

Crude Oil Hedging Strategies Using Dynamic Multivariate GARCH

The paper examines the performance of four multivariate volatility models, namely CCC, VARMA-GARCH, DCC and BEKK, for the crude oil spot and futures returns of two major benchmark international crude oil markets, Brent and WTI, to calculate optimal portfolio weights and optimal hedge ratios, and to suggest a crude oil hedge strategy. The empirical results show that the optimal portfolio weights of all multivariate volatility models for Brent suggest holding futures in larger proportions than spot. For WTI, however, DCC and BEKK suggest holding crude oil futures to spot, but CCC and VARMA-GARCH suggest holding crude oil spot to futures. In addition, the calculated optimal hedge ratios (OHRs) from each multivariate conditional volatility model give the time-varying hedge ratios, and recommend to short in crude oil futures with a high proportion of one dollar long in crude oil spot. Finally, the hedging effectiveness indicates that DCC (BEKK) is the best (worst) model for OHR calculation in terms of reducing the variance of the portfolio.conditional correlations;crude oil prices;hedging strategies;multivariate GARCH;optimal hedge ratio;optimal portfolio weights

"Crude Oil Hedging Strategies Using Dynamic Multivariate GARCH"

The paper examines the performance of four multivariate volatility models, namely CCC, VARMA-GARCH, DCC and BEKK, for the crude oil spot and futures returns of two major benchmark international crude oil markets, Brent and WTI, to calculate optimal portfolio weights and optimal hedge ratios, and to suggest a crude oil hedge strategy. The empirical results show that the optimal portfolio weights of all multivariate volatility models for Brent suggest holding futures in larger proportions than spot. For WTI, however, DCC and BEKK suggest holding crude oil futures to spot, but CCC and VARMA-GARCH suggest holding crude oil spot to futures. In addition, the calculated optimal hedge ratios (OHRs) from each multivariate conditional volatility model give the time-varying hedge ratios, and recommend to short in crude oil futures with a high proportion of one dollar long in crude oil spot. Finally, the hedging effectiveness indicates that DCC (BEKK) is the best (worst) model for OHR calculation in terms of reducing the variance of the portfolio.

Do speculators drive crude oil prices? Dispersion in beliefs as a price determinant

This article discusses the influence of speculators in the futures market on crude oil prices. The results suggest the dispersion in beliefs influences both crude oil prices and price volatility. --crude oil market,futures market,speculation

Crude Oil Price, Monetary Policy and Output: The Case of Pakistan

This paper has analysed the impact of rising crude oil prices on output. Crude oil prices and real output are found to be strongly related, and this relationship has a bellshape. That is, when crude oil prices are below the critical level (i.e., 22 $s/bbl), the relationship between crude oil prices and real output is positive; whereas when the crude oil price rises and exceeds that critical level the relationship becomes negative. Moreover, high debt-GDP ratio, high deficit spending, and high real effective exchange rate would have a negative impact on output. While the existence of foreign exchange reserves and capital investment would cause output to rise.Oil Prices, Output, Pakistan, Macroeconomy

Non-Linear Unit Root Properties of Crude Oil Production

While there is good reason to expect crude oil production to be non-linear, previous studies that have examined the stochastic properties of crude oil production have assumed that crude oil production follows a linear process. If crude oil production is a non-linear process, conventional unit root tests, which assume linear and systematic adjustment, could interpret departure from linearity as permanent stochastic disturbances. The objective of this paper is to test for non-linearities and unit roots in crude oil production. To realize our objective, this study applies a threshold autoregressive model with an autoregressive unit root to monthly crude oil production levels for 16 OPEC and non-OPEC countries over the period January 1973 to December 2006. Specifically, first we test for the presence of non-linearities (threshold effects) in the production of crude oil in two regimes. Second, we test for a unit root against a non-linear stationary process in two regimes and a partial unit root process when the unit root is present in one regime only. We find that crude oil production is characterized by threshold effects. We find that for ten of the countries a unit root was present in both regimes, while for the others a partial unit root was found to be present in either the first regime or second regime.Oil production, unit root, linearities.

Modeling the Effect of Oil Price on Global Fertilizer Prices

The main purpose of this paper is to evaluate the effect of crude oil price on global fertilizer prices in both the mean and volatility. The endogenous structural breakpoint unit root test, the autoregressive distributed lag (ARDL) model, and alternative volatility models, including the generalized autoregressive conditional heteroskedasticity (GARCH) model, Exponential GARCH (EGARCH) model, and GJR model, are used to investigate the relationship between crude oil price and six global fertilizer prices. Weekly data for 2003-2008 for the seven price series are analyzed. The empirical results from ARDL show that most fertilizer prices are significantly affected by the crude oil price, which explains why global fertilizer prices reached a peak in 2008. We also find that that the volatility of global fertilizer prices and crude oil price from March to December 2008 are higher than in other periods, and that the peak crude oil price caused greater volatility in the crude oil price and global fertilizer prices. As volatility invokes financial risk, the relationship between oil price and global fertilizer prices and their associated volatility is important for public policy relating to the development of optimal energy use, global agricultural production, and financial integration.Volatility; Global fertilizer price; Crude oil price; Non-renewable fertilizers; Structural breakpoint unit root test

Modeling the Effect of Oil Price on Global Fertilizer Prices

The main purpose of this paper is to evaluate the effect of crude oil price on global fertilizer prices in both the mean and volatility. The endogenous structural breakpoint unit root test, the autoregressive distributed lag (ARDL) model, and alternative volatility models, including the generalized autoregressive conditional heteroskedasticity (GARCH) model, Exponential GARCH (EGARCH) model, and GJR model, are used to investigate the relationship between crude oil price and six global fertilizer prices. Weekly data for 2003-2008 for the seven price series are analyzed. The empirical results from ARDL show that most fertilizer prices are significantly affected by the crude oil price, which explains why global fertilizer prices reached a peak in 2008. We also find that that the volatility of global fertilizer prices and crude oil price from March to December 2008 are higher than in other periods, and that the peak crude oil price caused greater volatility in the crude oil price and global fertilizer prices. As volatility invokes financial risk, the relationship between oil price and global fertilizer prices and their associated volatility is important for public policy relating to the development of optimal energy use, global agricultural production, and financial integration.volatility;crude oil price;global fertilizer price;non-renewable fertilizers;structural breakpoint unit root test

Consumption and Hedging in Oil Importing Developing Countries

We study the consumption and hedging strategy of an oil-importing developing country that faces multiple crude oil shocks. In our model, developing countries have two particular characteristics: their economies are mainly driven by natural resources and their technologies are less e cient in energy usage. The natural resource exports can be correlated with the crude oil shocks. The country can hedge against the crude oil uncertainty by taking long/short positions in existing crude oil futures contracts. We find that both, ine ciencies in energy usage and shocks to the crude oil price, lower the productivity of capital. This generates a negative income e ect and a positive substitution e ect, because today's consumption is relatively cheaper than tomorrow's consumption. Optimal consumption of the country depends on the magnitudes of these e ects and on its risk-aversion degree. Shocks to other crude oil factors, such as the convenience yield, are also studied. We nd that the persistence of the shocks magni es the income and substitution e ects on consumption, thus a ecting also the hedging strategy of the country. The demand for futures contracts is decomposed in a myopic demand, a pure hedging term and productive hedging demands. These hedging demands arise to hedge against changes in the productivity of capital due to changes in crude oil spot prices. We calibrate the model for Chile and study up to what extent the country's copper exports can be used to hedge the crude oil risk.Crude oil prices, convenience yields, risk management, emerging markets, government policy, two-sector economies

Gasoline and crude oil prices: why the asymmetry?

Many consumers complain that gasoline and crude oil prices have an asymmetric relationship in which gasoline prices raise more quickly when crude oil prices are rising than they fall when crude oil prices are falling. Many also regard the asymmetry they observe as evidence of market power in the petroleum industry. Most previous research provides econometric evidence of the asymmetry, confirming at least part of what consumers suspect. In this article Stephen Brown and Mine Yucel extend the inquiry by examining the market conditions underlying the asymmetric relationship between gasoline and crude oil prices. They find the observed asymmetry is unlikely to be the result of monopoly power. The remaining explanations for the asymmetry suggest that policies to prevent an asymmetric relationship between gasoline and crude oil prices are likely to reduce economic efficiency.