OPEC Energy Review

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  • Assessment of economic diversification in Saudi Arabia through nine development plans

    This paper aims to assess the efforts of the Saudi government in diversifying its economy. A descriptive analysis was used to evaluate the efforts the Saudi government exerted to enhance economic diversification through nine development plans covering 45 years (from 1970 to 2014). Two measures of economic diversification were applied, instability of private gross domestic product (GDP) and its relation to oil price instability, and relative contribution of private and public sectors to GDP. The research concludes that Saudi government has succeeded in moving towards economic diversification in the last two development plans compared to the previous seven development plans, although the economic diversification was a slow‐paced process. The performance of the private sector is still low which calls for a prompt intervention from the Saudi government to improve the legislative environment, competition, and attracting big international companies to enter Saudi market and raise the level of efficiency of the private sector and achieve its main goal of being less dependent on oil sector and its revenue.

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  • The physical market and the WTI/Brent price spread

    West Texas Intermediate (WTI) and Brent Crude are primary benchmarks in oil pricing. Although produced in different locations, WTI and Brent are of similar quality and are used for similar purposes. Under the oil market globalisation assumption (Weiner, 1991), prices of crude oils with the same quality should move closely together at all times. However, empirical evidence shows that notable variations exist in the WTI/Brent spread, particularly after 2010, creating risks as well as potential arbitrage opportunities for oil market participants. The paper analyses the dynamics of WTI/Brent price spread for the period between January 1994 and December 2016. A test for structural breaks in the WTI/Brent price spread indicates a change from a stationary to a non‐stationary time series in December 2010, which is also confirmed by the unit root and cointegration tests. The impact of physical market fundamentals on the dynamics of WTI/Brent price spread is then analysed using the Structural Vector Autoregression Model for each sub‐sample period separated by the structural break. Impulse response functions show that the WTI/Brent spread is mainly driven by US production shocks.

  • On the determinants of electricity power losses: empirics from Ghana

    This paper empirically examines the determinants of electricity power losses (EPL) for the Ghanaian economy. Since 2001, EPL for the economy has been more than 20% of the total electricity generated which already is inadequate to meet growing electricity demand. The Fully Modified Ordinary Least Square was used to estimate the drivers of Ghana's EPL, using annual time series data from 1971 to 2013. The results showed that education, price of electricity, capital investment, income, manufacturing and population have significantly influenced the trend of Ghana's electricity losses over the years. The paper recommends the need to intensify capital investment in the power sector as well as public education to deal with EPL.

  • The growth effects of stabilisation funds and fiscal rules in oil‐rich African economies: empirical evidence and development policy implications from a Nigerian case study

    This paper empirically examines the growth effects of stabilisation funds and fiscal rules in oil‐rich African countries, using Nigeria as a case study. The analysis captures the ‘international standard’ of the two fiscal instruments by empirically comparing the effects of Nigerian instruments with those of non‐African oil‐exporting countries (i.e. Norway and Mexico). The results show that the fiscal instruments are effective in Nigeria and that the effectiveness is comparable to that of non‐African economies, implying that the Nigerian instruments meet ‘international standard’. The paper also discusses the development policy implications of the results, one of which is that the fiscal instruments can be used to control risky behaviours of economic agents in oil‐rich African economies. For example, since the instruments are effective in increasing growth (i.e. real GDP growth) and limiting its volatility, they can be employed to control increases in demand for and supply of risky sex caused by increases in real per capita income during oil booms.

  • Big Data: a big opportunity for the petroleum and petrochemical industry

    The Petroleum and Petrochemical (P&P) industry is home to the most traded commodity in the world, i.e. oil. Recently, this industry has been struggling to make ends meet with top lines being affected by falling oil prices and bottom lines being squeezed further via increasing operational costs. It is against this backdrop that this paper seeks to identify and summarise the positive influence that the adoption of Big Data can have on the P&P industry. Exhaustive research is carried out on the industry's engagement and adoption of Big Data in upstream, midstream and downstream operations to concisely summarise the varied applications and the potential benefits. Our research indicates that the upstream sector is actively engaging with Big Data to achieve efficiency gains while the midstream and downstream sectors are lagging behind. Overall, it is evident that the P&P industry can find solutions to its aching financial and productivity issues by embracing of Big Data.

  • The effect of electricity technical losses on Ghana's economy: a simulation evaluation

    This study investigates the effects of electricity distribution inefficiencies in Ghana's electricity sector on output, consumption and investments. Inefficiencies are considered as losses in transmission and distribution channels from the generator to the final consumer of energy leading to supply–demand mismatch (shortages and blackouts). We assume that, a high inefficiency reflects high electricity cost in the sector. A simple dynamic version of the Ramsey growth model is developed, providing analytical solutions and applying simulations to evaluate the economic cost. Results from the simulations show that, electricity shortages and blackouts reduce output, consumption and investments in the economy. Improvements in energy technologies for generating and distributing electricity can offset the negative impacts and improve efficiency in the sector.

  • Evaluating the GDP–energy consumption nexus for the ASEAN‐5 countries using nonlinear ARDL model

    This study investigates the GDP–energy consumption nexus for five Asian countries (ASEAN‐5) during the 1971–2013 period by estimating the asymmetric long‐run as well as short‐run effects in a cointegration framework. We apply the recently developed nonlinear autoregressive distributed lags (NARDL) model of Shin et al. () for individual country‐by‐country analysis. Meanwhile, we employ the pooled mean group (PMG) estimator of Pesaran and Smith () and Pesaran et al. () for the ASEAN‐5 countries pooled as a panel set. The empirical results, in case of country‐by‐country, show long‐run asymmetry for Singapore and Thailand only, when considering structural breaks. However, the panel analysis confirms asymmetry for the sample data. Finally, the causality tests employed show mixed results for both set‐ups: country‐by‐country and panel sample.

  • Global scenarios for fuel oil utilisation under new sulphur and carbon regulations

    Fuel oil is an important derivative of crude oil used mainly in marine transport and power generation. The environmental impact of this important energy vector continues to be a major challenge due to its high sulphur and carbon content. In this work, we analyse the impact of sulphur cap and CO2 price on the inter‐competition between fuel oil and alternative low‐sulphur low‐carbon fuels. It was found that the increase in crude oil prices enhances the cost‐effectiveness of using middle distillates compared to using fuel oil with scrubbing systems. In addition, we found that imposing a CO2 price between $50–150/TonCO2 leads to reducing the emissions from fuel oil combustion by up to 87 per cent by 2040. In comparison with previous literature, we show that fuel oil will represent at least 56 per cent by 2030, under the low oil price scenario, if scrubbing systems are implemented in the shipping industry.

  • The policy implications of the relationship between energy consumption, energy intensity and economic growth in Ghana

    The 19739/74 and 1979/1980 oil price shocks coupled with the unreliability of its supply as against the ever‐increasing demand for energy‐based inputs, further reinforced the stern implications that energy may have on economic development reducing energy intensity is often advocated as a way to ensure efficient utilisation of energy resources and minimising the adverse effects of its shortage on economic development. Using the annual time series data set spanning 1981–2014 this study examined, in Ghana where energy crises continue to immense adverse effects on the economy, the relationships between energy consumption and economic growth at the one hand, and that between energy intensity and economic growth on the other hand within the standard Environmental Kuznets Curve framework. In Autoregressive Distributed Lagged model estimation, there was strong evidence of the existence of a valid long‐run relationship between energy consumption and economic growth as well as energy intensity and economic growth.

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