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Measuring external oil supply risk: A modified diversification index with country risk and potential oil exports

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  • Yang, Yuying
  • Li, Jianping
  • Sun, Xiaolei
  • Chen, Jianming

Abstract

External oil supply risk is an important aspect of energy security and oil import diversification is viewed as one of the most effective measures to reduce supply risk. By using the diversification index approach, this research attempts to assess external oil supply risks of oil importers with consideration of two key factors associated with oil suppliers, country risk and potential oil exports capacity. The former can be used to reflect the oil supply risk associated with oil suppliers' macro-economic and socio-political stability and the latter is directly related with the physical availability of oil. The empirical research on China, Japan, the US and EU demonstrates that Japan's oil importing strategy is more concerned about potential exports of oil suppliers than country risk; the EU's oil imports have a good balance between country risk and potential exports of oil suppliers; the US has successfully diversified its oil imports to maintain the security of its external oil supply. With the rapid increase in oil demand, China has changed its oil import policy by expanding oil trade partners and switching to suppliers with high potential oil exports. Some further suggestions are presented for China to ensure its oil supply security in the future.

Suggested Citation

  • Yang, Yuying & Li, Jianping & Sun, Xiaolei & Chen, Jianming, 2014. "Measuring external oil supply risk: A modified diversification index with country risk and potential oil exports," Energy, Elsevier, vol. 68(C), pages 930-938.
  • Handle: RePEc:eee:energy:v:68:y:2014:i:c:p:930-938
    DOI: 10.1016/j.energy.2014.02.091
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    References listed on IDEAS

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    Cited by:

    1. Dahl, Roy Endre & Lorentzen, Sindre & Oglend, Atle & Osmundsen, Petter, 2016. "Pro-Cyclical Petroleum Investments and Cost Overruns in Norway by Roy Endré Dahl, Sindre Lorentzen, Atle Oglend, and Petter Osmundsen," UiS Working Papers in Economics and Finance 2016/7, University of Stavanger.
    2. repec:eee:enepol:v:114:y:2018:i:c:p:30-38 is not listed on IDEAS
    3. van Moerkerk, Mike & Crijns-Graus, Wina, 2016. "A comparison of oil supply risks in EU, US, Japan, China and India under different climate scenarios," Energy Policy, Elsevier, vol. 88(C), pages 148-158.
    4. repec:eee:energy:v:155:y:2018:i:c:p:438-447 is not listed on IDEAS
    5. Zhong, Weiqiong & An, Haizhong & Shen, Lei & Dai, Tao & Fang, Wei & Gao, Xiangyun & Dong, Di, 2017. "Global pattern of the international fossil fuel trade: The evolution of communities," Energy, Elsevier, vol. 123(C), pages 260-270.
    6. Sun, Xiaolei & Liu, Chang & Chen, Xiuwen & Li, Jianping, 2017. "Modeling systemic risk of crude oil imports: Case of China’s global oil supply chain," Energy, Elsevier, vol. 121(C), pages 449-465.
    7. Liu, Chang & Sun, Xiaolei & Chen, Jianming & Li, Jianping, 2016. "Statistical properties of country risk ratings under oil price volatility: Evidence from selected oil-exporting countries," Energy Policy, Elsevier, vol. 92(C), pages 234-245.
    8. Dahl, Roy Endré & Lorentzen, Sindre & Oglend, Atle & Osmundsen, Petter, 2017. "Pro-cyclical petroleum investments and cost overruns in Norway," Energy Policy, Elsevier, vol. 100(C), pages 68-78.
    9. Kharrazi, Ali & Fath, Brian D., 2016. "Measuring global oil trade dependencies: An application of the point-wise mutual information method," Energy Policy, Elsevier, vol. 88(C), pages 271-277.
    10. Sato, Masahiro & Kharrazi, Ali & Nakayama, Hirofumi & Kraines, Steven & Yarime, Masaru, 2017. "Quantifying the supplier-portfolio diversity of embodied energy: Strategic implications for strengthening energy resilience," Energy Policy, Elsevier, vol. 105(C), pages 41-52.
    11. Kamonphorn Kanchana & Hironobu Unesaki, 2015. "Assessing Energy Security Using Indicator-Based Analysis: The Case of ASEAN Member Countries," Social Sciences, MDPI, Open Access Journal, vol. 4(4), pages 1-47, December.

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