• Environmental and Resource Economics Review
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• v.31 no.4
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• pp.755-775
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• 2022

This study empirically analyzes that the asymmetry of domestic gasoline price adjustment to the crude oil price changes can vary depending on the level of gasoline price using quantile autoregressive distributed lag model. The data used are the weekly average Dubai price, domestic gasoline price at refiners and gas stations from the first week of May 2008 to the second week of October 2022. The study estimates three price transmission channels: changes in gas station gasoline prices in response to changes in Dubai oil prices, changes in refiners gasoline prices in response to changes in Dubai oil prices, and changes in gas station prices relative to refiners gasoline prices. As a result, the price adjustment of refiner's gasoline price with respect to Dubai oil price appears asymmetrically across all quantiles of gasoline price, whereas the adjustment of gas station prices for Dubai oil price and refiner's gasoline price tend to be more asymmetric as the quantile of gasoline price increases. Such a result is presumed to be due to changes in the inventory cost of gas stations. When the burden of inventory cost is high, gas stations have an incentive to more actively pass the increased buying price on their selling price.

• Journal of Distribution Science
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• v.11 no.10
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• pp.73-79
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• 2013

Purpose - This study examines the impact of oil price volatility on economic activities in Korea. The new millennium has seen a deregulation in the crude oil market, which invited immense capital inflow into Korea. It has also raised oil price levels and volatility. Drawing on the recent theoretical literature that emphasizes the role of volatility, this paper attends to the asymmetric changes in economic growth in response to the oil price movement. This study further examines several key macroeconomic variables, such as interest rate, production, and inflation. We come to the conclusion that oil price volatility can, in some part, explain the structural changes. Research design, data, and methodology - We use two methodological frameworks in this study. First, in regards to the oil price uncertainty, we use an Exponential-GARCH (Exponential Generalized Autoregressive Conditional Heteroskedasticity: EGARCH) model estimate to elucidate the asymmetric effect of oil price shock on the conditional oil price volatility. Second, along with the estimation of the conditional volatility by the EGARCH model, we use the estimates in a VECM (Vector Error Correction Model). The study thus examines the dynamic impacts of oil price volatility on industrial production, price levels, and monetary policy responses. We also approximate the monetary policy function by the yield of monetary stabilization bond. The data collected for the study ranges from 1990: M1 to 2013: M7. In the VECM analysis section, the time span is split into two sub-periods; one from 1990 to 1999, and another from 2000 to 2013, due to the U.S. CFTC (Commodity Futures Trading Commission) deregulation on the crude oil futures that became effective in 2000. This paper intends to probe the relationship between oil price uncertainty and macroeconomic variables since the structural change in the oil market became effective. Results and Conclusions - The dynamic impulse response functions obtained from the VECM show a prolonged dampening effect of oil price volatility shock on the industrial production across all sub-periods. We also find that inflation measured by CPI rises by one standard deviation shock in response to oil price uncertainty, and lasts for the ensuing period. In addition, the impulse response functions allude that South Korea practices an expansionary monetary policy in response to oil price shocks, which stems from oil price uncertainty. Moreover, a comparison of the results of the dynamic impulse response functions from the two sub-periods suggests that the dynamic relationships have strengthened since 2000. Specifically, the results are most drastic in terms of industrial production; the impact of oil price volatility shocks has more than doubled from the year 2000 onwards. These results again indicate that the relationships between crude oil price uncertainty and Korean macroeconomic activities have been strengthened since the year2000, which resulted in a structural change in the crude oil market due to the deregulation of the crude oil futures.

• Journal of the Korean Institute of Gas
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• v.3 no.2 s.7
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• pp.11-16
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• 1999

Oil and LNG products are characterized by the facts that the raw materials are all imported and financing is dependent heavily upon foreign countries. This makes the oil and LNG products sensitive to changes in foreign exchange rates. However, the extent to which they respond to changes in foreign exchange rates, particularly the extent of price changes, vary considerably, due to the differences in the structures of price determination. The purposes of this paper are twofolds. The first one is to analyze the structures of price determination of diesel, heavy oil, and LNG. The second one is to analyze the effects of changes in foreign exchange rates on the prices of and price competitiveness of the fuels in question through the sensitivity analysis. The results of the sensitivity analysis indicate that diesel price is most sensitive and heavy oil price is least sensitive to changes in foreign exchange rates.

• Asia-Pacific Journal of Business
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• v.14 no.1
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• pp.351-364
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• 2023

Purpose - This study examines the effects of Dubai oil price and the volatility on the asymmetry of domestic gasoline price adjustment. Additionally, the study investigates the effects of "Altteul" gas-station and tax-cut policies on asymmetry. Design/methodology/approach - Firstly, the study calculates proxies for asymmetry and volatility of each window(every 3-month) by error-correction model and GARCH(1, 1) using daily domestic gas price and Dubai oil price from 2008/04/15 to 2022/12/31. Secondly, the study investigates the effects of the increasing rate of Dubai oil price, volatility, "Altteul" gas-station and tax-cut policies on asymmetry. The autoregressive distributed lag regression model is employed for estimations. Findings - The study finds that changes in the increasing rate of Dubai oil price and both types of volatility of Dubai oil price increase asymmetry. While "Altteul" gas-station and tax-cut policies decrease asymmetry. Additionally, the study fails to find that asymmetry in the Korean gasoline market in the estimation with total observations. Research implications or Originality - An increase in Dubai oil price volatility means an increase in cost uncertainty for gas-station owners. Since cost uncertainty is a kind of financial risk, the increase in volatility reinforces the asymmetry. The study provides supporting evidence for the idea.

• Environmental and Resource Economics Review
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• v.19 no.2
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• pp.215-242
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• 2010

This study constructs a bayesian neoclassical DSGE model that applies oil usage. The model includes technology shocks, oil price shocks, and shocks to energy policies as exogenous driving forces. First, this study aims to analyze the roles of these exogenous shocks in the Korean business cycle. Second, this study examines the effects of long-term changes in the energy consumption structure, including the reduction in oil use as a share of energy consumption and improvement in oil efficiency. In the case of oil price shocks, results show that these shocks exert recessionary pressure on the economy in line with those obtained in the previous literature. On the other hand, shocks to energy policies, which reduce oil consumption per capital, result in opposite consequences to oil price shocks, decreasing oil consumption. Also, counterfactual exercises show that long-term changes in the energy consumption structure would mitigate the contractionary effects of oil price shocks.

• Environmental and Resource Economics Review
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• v.14 no.2
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• pp.291-336
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• 2005

This paper investigates how oil price changes have an impact on the Korean manufacturing production activities. For this investigation, we use a structural VAR motel to estimate impulse response functions of industrial production, producer price and export price to an oil price increase over manufacturing industries. It finds that in most manufacturing industries, an oil price increase leads to decreases in industrial productions and domestic prices except energy intensive industries, but to increases in industrial export prices except non-metallic (26), computers and offic machinery (30), electronic components, radio, television and communication (32) industries. This result explains that an oil price increase makes negative impacts on the manufacturing production activities not only through demand slowdown in the domestic markets but also through supply contraction in the export markets.

• Environmental and Resource Economics Review
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• v.31 no.2
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• pp.233-260
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• 2022

In this paper, we analyzed how oil price fluctuations affect stock price by industry using the non-parametric quantile causality test method. We used weekly data of WTI spot price, KOSPI index, and 22 industrial stock indices from January 1998 to April 2021. The empirical results show that the effect of changes in oil prices on the KOSPI index was not significant, which can be attributed to mixed responses of diverse stock prices in several industries included in the KOSPI index. Looking at the stock price response to oil price by industry, the 9 of 18 industries, including Cloth, Paper, and Medicine show a causality with oil prices, while 9 industries, including Food, Chemical, and Non-metal do not show a causal relationship. Four industries including Medicine and Communication (0.45~0.85), Cloth (0.15~0.45), and Construction (0.5~0.6) show causality with oil prices more than three quantiles consecutively. However, the quantiles in which causality appeared were different for each industry. From the result, we find that the effects of oil price on the stock prices differ significantly by industry, and even in one industry, and the response to oil price changes is different depending on the market situation. This suggests that the government's macroeconomic policies, such as industrial and employment policies, should be performed in consideration of the differences in the effects of oil price fluctuations by industry and market conditions. It also shows that investors have to rebalance their portfolio by industry when oil prices fluctuate.

• Journal of the Korean Society of Fisheries and Ocean Technology
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• v.55 no.3
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• pp.264-272
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• 2019

The aim of this study is to analyze the relationship between international oil price as a fuel cost in overseas fisheries and skipjack tuna price as a part of main products in overseas fisheries using monthly time series data from 2008 to 2017. The study also tried to analyze the change of fishing profits by fuel cost. For a time series analysis, this study conducted both the unit-root test for stability of data and the Johansen cointegration test for long-term equilibrium relations among variables. In addition, it used not only the Granger causality test to examine interactions among variables, but also the Vector Auto Regressive (VAR) model to estimate statistical impacts among variables used in the model. Results of this study are as follows. First, each data on variables was not found to be stationary from the ADF unit-root test and long-term equilibrium relations among variables were not found from a Johansen cointegration test. Second, the Granger causality test showed that the international oil prices would directly cause changes in skipjack tuna prices. Third, the VAR model indicated that the posterior t-2 period change of international oil price would have an statistically significant effect on changes of skipjack tuna prices. Finally, fishing profits from skipjack would be decreased by 0.06% if the fuel cost increases by 1%.

• Environmental and Resource Economics Review
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• v.26 no.3
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• pp.451-472
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• 2017

An OPEC production announcement is a major source of supply disruption that has a significant impact on the international crude oil market. In this study, the effects of OPEC's announcements are analyzed using event study methodology. Considering the oil price volatility and structural changes in the oil price, we divide the entire period into three periods and analyze the impact of OPEC's production quota announcements, including 'cut', 'hike', and 'maintain'. As a result of the analysis, we observe that the degree and direction of abnormal returns differ according to the announcements in each period. In addition, by subdividing oil price surge and plunge period into two sections, we analyze the effect of OPEC's 'maintain' announcements. During the oil price plunge period, the amount of abnormal returns was significant. This study provides policy implications for oil trading strategies and for the impact of OPEC announcements during periods of oil price fluctuation.

• Proceedings of the Korea Society for Energy Engineering kosee Conference
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• 1999.11a
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• pp.225-230
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• 1999

Since changes in crude oil price exert colossal influence upon most national economy, it is important to investigate about factors that cause the change through an appropriate crude oil price forecast. This paper examines the relationship among crude oil price, OPEC production and U.S. inventory using cointegration and error correction model. We found that crude oil price is likely to increase significantly for a given decrease in not only the OPEC production but also the U.S. inventory. Furthermore, we found that crude oil price is more elastic with respect to OPEC production in the short-run, and more elastic with respect to U.S. inventory in the long-run. Moreover, in the long-run, U.S. inventory have more an effect on crude oil price than OPEC production. Finally, crude oil price adjusts to their respective long-run equilibrium at a moderate speed, about 12% of adjustment taking place in the first year.