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Evolution of the world crude oil market integration: A graph theory analysis

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  • Ji, Qiang
  • Fan, Ying

Abstract

This paper investigates the evolution of the world crude oil market and the pricing power for major oil-producing and oil-consuming countries using graph theory. A minimal spanning tree for the world crude oil market is constructed and some empirical results are given. The integration of the world crude oil market is verified. Furthermore, the world crude oil market is characterised as a geographical and organisational structure. The crude oil markets of adjacent countries or regions tend to link together, while OPEC is well-integrated. We also found that the links in the South and North American region and the African region are relatively stable. The crude oil markets in the U.S., Angola and Saudi Arabia take up the core, with a higher ‘betweenness centrality’ and lower ‘farness’, whereas the markets in the East and Southeast Asian countries are on the fringe. Finally, the degree of globalisation for the world crude oil market is becoming further entrenched, verified by a decreasing normalised tree length; hence, its systemic risk may increase due to the future uncertainty of world politics.

Suggested Citation

  • Ji, Qiang & Fan, Ying, 2016. "Evolution of the world crude oil market integration: A graph theory analysis," Energy Economics, Elsevier, vol. 53(C), pages 90-100.
  • Handle: RePEc:eee:eneeco:v:53:y:2016:i:c:p:90-100
    DOI: 10.1016/j.eneco.2014.12.003
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Riza Demirer & Rangan Gupta & Qiang Ji & Aviral Kumar Tiwari, 2018. "Geopolitical Risks and the Predictability of Regional Oil Returns and Volatility," Working Papers 201860, University of Pretoria, Department of Economics.
    2. Marfatia, Hardik A. & Gupta, Rangan & Cakan, Esin, 2017. "The international REIT’s time-varying response to the U.S. monetary policy and macroeconomic surprises," The North American Journal of Economics and Finance, Elsevier, vol. 42(C), pages 640-653.
    3. Ji, Qiang & Fan, Ying, 2016. "How do China's oil markets affect other commodity markets both domestically and internationally?," Finance Research Letters, Elsevier, vol. 19(C), pages 247-254.
    4. Huang, Shupei & An, Haizhong & Gao, Xiangyun & Wen, Shaobo & Jia, Xiaoliang, 2016. "The global interdependence among oil-equity nexuses," Energy, Elsevier, vol. 107(C), pages 259-271.
    5. repec:eee:eneeco:v:67:y:2017:i:c:p:98-110 is not listed on IDEAS
    6. repec:eee:phsmap:v:490:y:2018:i:c:p:1335-1343 is not listed on IDEAS
    7. repec:eee:finana:v:57:y:2018:i:c:p:1-12 is not listed on IDEAS
    8. repec:eee:eneeco:v:68:y:2017:i:c:p:240-254 is not listed on IDEAS
    9. repec:eee:phsmap:v:509:y:2018:i:c:p:998-1008 is not listed on IDEAS

    More about this item

    Keywords

    Crude oil market; Globalisation; Graph theory; Minimal spanning tree;

    JEL classification:

    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices
    • G1 - Financial Economics - - General Financial Markets
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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