IDEAS home Printed from https://ideas.repec.org/a/eee/jrpoli/v79y2022ics0301420722004974.html
   My bibliography  Save this article

Outlook of oil prices and volatility from 1970 to 2040 through global energy mix-security from production to reserves: A nonparametric causality-in-quantiles approach

Author

Listed:
  • Alola, Andrew A.
  • Adekoya, Oluwasegun B.
  • Oliyide, Johnson A.

Abstract

In the midst of the global challenge of climate change induced by the consumption of fossil fuels, energy security remains a global concern. Thus, this study examines the role of energy security from the witty perspective of the production and reserves of the world’s leading energy mix (oil, natural gas, and coal) in the dynamics of global crude oil prices and volatility over the period of 1970–2040. Having discovered nonlinear dynamics in the relationship, we employ the nonparametric causality-in-quantiles test which differentiates causality-in-mean from the causality-in-variance. The results show that the causality-in-variance is exceedingly stronger than causality-in-mean for the predictability of oil price. The mean oil price is unpredictable by the production and reserves of the energy sources, except those of crude oil and natural gas at the lower quantiles. Moreover, the production and reserves of all the energy sources are strong predictors of the volatility of oil price for most of the quantiles. This is further confirmed by the causality-in-mean conducted for the actual oil price volatility series. In general, this study weighs in from the perspective of an effective policy instrument associated with the trilemma among crude oil price, energy security, and environmental sustainability.

Suggested Citation

  • Alola, Andrew A. & Adekoya, Oluwasegun B. & Oliyide, Johnson A., 2022. "Outlook of oil prices and volatility from 1970 to 2040 through global energy mix-security from production to reserves: A nonparametric causality-in-quantiles approach," Resources Policy, Elsevier, vol. 79(C).
  • Handle: RePEc:eee:jrpoli:v:79:y:2022:i:c:s0301420722004974
    DOI: 10.1016/j.resourpol.2022.103054
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301420722004974
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.resourpol.2022.103054?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Morana, Claudio, 2013. "Oil price dynamics, macro-finance interactions and the role of financial speculation," Journal of Banking & Finance, Elsevier, vol. 37(1), pages 206-226.
    2. Mehmet Balcilar & Rangan Gupta & Clement Kyei & Mark E. Wohar, 2016. "Does Economic Policy Uncertainty Predict Exchange Rate Returns and Volatility? Evidence from a Nonparametric Causality-in-Quantiles Test," Open Economies Review, Springer, vol. 27(2), pages 229-250, April.
    3. Peter Ferderer, J., 1996. "Oil price volatility and the macroeconomy," Journal of Macroeconomics, Elsevier, vol. 18(1), pages 1-26.
    4. Jawadi, Fredj & Louhichi, Waël & Ameur, Hachmi Ben & Cheffou, Abdoulkarim Idi, 2016. "On oil-US exchange rate volatility relationships: An intraday analysis," Economic Modelling, Elsevier, vol. 59(C), pages 329-334.
    5. Antonakakis, Nikolaos & Chatziantoniou, Ioannis & Filis, George, 2014. "Dynamic Spillovers of Oil Price Shocks and Policy Uncertainty," Department of Economics Working Paper Series 166, WU Vienna University of Economics and Business.
    6. Ji, Qiang & Guo, Jian-Feng, 2015. "Oil price volatility and oil-related events: An Internet concern study perspective," Applied Energy, Elsevier, vol. 137(C), pages 256-264.
    7. Shiu-Sheng Chen, 2014. "Forecasting Crude Oil Price Movements With Oil-Sensitive Stocks," Economic Inquiry, Western Economic Association International, vol. 52(2), pages 830-844, April.
    8. Chevillon, Guillaume & Rifflart, Christine, 2009. "Physical market determinants of the price of crude oil and the market premium," Energy Economics, Elsevier, vol. 31(4), pages 537-549, July.
    9. Demirer, Riza & Gupta, Rangan & Pierdzioch, Christian & Shahzad, Syed Jawad Hussain, 2020. "The predictive power of oil price shocks on realized volatility of oil: A note," Resources Policy, Elsevier, vol. 69(C).
    10. Narayan, Paresh Kumar & Narayan, Seema, 2007. "Modelling oil price volatility," Energy Policy, Elsevier, vol. 35(12), pages 6549-6553, December.
    11. Bekiros, Stelios & Gupta, Rangan & Paccagnini, Alessia, 2015. "Oil price forecastability and economic uncertainty," Economics Letters, Elsevier, vol. 132(C), pages 125-128.
    12. Chul-Yong Lee & Sung-Yoon Huh, 2017. "Forecasting Long-Term Crude Oil Prices Using a Bayesian Model with Informative Priors," Sustainability, MDPI, vol. 9(2), pages 1-15, January.
    13. Adekoya, Oluwasegun B. & Oliyide, Johnson A. & Oduyemi, Gabriel O., 2021. "How COVID-19 upturns the hedging potentials of gold against oil and stock markets risks: Nonlinear evidences through threshold regression and markov-regime switching models," Resources Policy, Elsevier, vol. 70(C).
    14. Wu, Yu-Xi & Wu, Qing-Biao & Zhu, Jia-Qi, 2019. "Improved EEMD-based crude oil price forecasting using LSTM networks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 516(C), pages 114-124.
    15. Aloui, Riadh & Gupta, Rangan & Miller, Stephen M., 2016. "Uncertainty and crude oil returns," Energy Economics, Elsevier, vol. 55(C), pages 92-100.
    16. Safari, Ali & Davallou, Maryam, 2018. "Oil price forecasting using a hybrid model," Energy, Elsevier, vol. 148(C), pages 49-58.
    17. Lammerding, Marc & Stephan, Patrick & Trede, Mark & Wilfling, Bernd, 2013. "Speculative bubbles in recent oil price dynamics: Evidence from a Bayesian Markov-switching state-space approach," Energy Economics, Elsevier, vol. 36(C), pages 491-502.
    18. Toon Vandyck & Alban Kitous & Bert Saveyn & Kimon Keramidas & Luis Rey Los Santos & Krzysztof Wojtowicz, 2018. "Economic Exposure to Oil Price Shocks and the Fragility of Oil-Exporting Countries," Energies, MDPI, vol. 11(4), pages 1-19, April.
    19. Sovacool, Benjamin K., 2013. "An international assessment of energy security performance," Ecological Economics, Elsevier, vol. 88(C), pages 148-158.
    20. van Eyden, Reneé & Difeto, Mamothoana & Gupta, Rangan & Wohar, Mark E., 2019. "Oil price volatility and economic growth: Evidence from advanced economies using more than a century’s data," Applied Energy, Elsevier, vol. 233, pages 612-621.
    21. James D. Hamilton, 2009. "Understanding Crude Oil Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 179-206.
    22. Olanipekun, Ifedolapo Olabisi & Alola, Andrew Adewale, 2020. "Crude oil production in the Persian Gulf amidst geopolitical risk, cost of damage and resources rents: Is there asymmetric inference?," Resources Policy, Elsevier, vol. 69(C).
    23. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    24. Adekoya, Oluwasegun B. & Oliyide, Johnson A., 2021. "How COVID-19 drives connectedness among commodity and financial markets: Evidence from TVP-VAR and causality-in-quantiles techniques," Resources Policy, Elsevier, vol. 70(C).
    25. Miljkovic, Dragan & Goetz, Cole, 2020. "The effects of futures markets on oil spot price volatility in regional US markets," Applied Energy, Elsevier, vol. 273(C).
    26. Jeong, Kiho & Härdle, Wolfgang K. & Song, Song, 2012. "A Consistent Nonparametric Test For Causality In Quantile," Econometric Theory, Cambridge University Press, vol. 28(4), pages 861-887, August.
    27. Wang, Yudong & Ma, Feng & Wei, Yu & Wu, Chongfeng, 2016. "Forecasting realized volatility in a changing world: A dynamic model averaging approach," Journal of Banking & Finance, Elsevier, vol. 64(C), pages 136-149.
    28. Nishiyama, Yoshihiko & Hitomi, Kohtaro & Kawasaki, Yoshinori & Jeong, Kiho, 2011. "A consistent nonparametric test for nonlinear causality—Specification in time series regression," Journal of Econometrics, Elsevier, vol. 165(1), pages 112-127.
    29. Noguera-Santaella, José, 2016. "Geopolitics and the oil price," Economic Modelling, Elsevier, vol. 52(PB), pages 301-309.
    30. Liu, Li & Wang, Yudong & Wu, Chongfeng & Wu, Wenfeng, 2016. "Disentangling the determinants of real oil prices," Energy Economics, Elsevier, vol. 56(C), pages 363-373.
    31. Michael Ye & John Zyren & Joanne Shore, 2002. "Forecasting crude oil spot price using OECD petroleum inventory levels," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 8(4), pages 324-333, November.
    32. Monge, Manuel & Gil-Alana, Luis A. & Pérez de Gracia, Fernando, 2017. "Crude oil price behaviour before and after military conflicts and geopolitical events," Energy, Elsevier, vol. 120(C), pages 79-91.
    33. Awaworyi Churchill, Sefa & Inekwe, John & Ivanovski, Kris & Smyth, Russell, 2019. "Dynamics of oil price, precious metal prices and the exchange rate in the long-run," Energy Economics, Elsevier, vol. 84(C).
    34. Hui Guo & Kevin L. Kliesen, 2005. "Oil price volatility and U.S. macroeconomic activity," Review, Federal Reserve Bank of St. Louis, vol. 87(Nov), pages 669-684.
    35. Antonakakis, Nikolaos & Chatziantoniou, Ioannis & Filis, George, 2014. "Dynamic spillovers of oil price shocks and economic policy uncertainty," Energy Economics, Elsevier, vol. 44(C), pages 433-447.
    36. Ine Van Robays, 2016. "Macroeconomic Uncertainty and Oil Price Volatility," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 78(5), pages 671-693, October.
    37. Zhang, Yaojie & Wei, Yu & Zhang, Yi & Jin, Daxiang, 2019. "Forecasting oil price volatility: Forecast combination versus shrinkage method," Energy Economics, Elsevier, vol. 80(C), pages 423-433.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wang, Shengyan & Li, Bingkang & Zhao, Xudong & Hu, Qianchen & Liu, Da, 2024. "Assessing fossil energy supply security in China using ecological network analysis from a supply chain perspective," Energy, Elsevier, vol. 288(C).
    2. Zhang, HongWei & Xie, Yuan, 2024. "Assessing natural resources, rebounding trends, digital economic structure and green recovery dynamics in China," Resources Policy, Elsevier, vol. 88(C).
    3. Alola, Andrew Adewale & Özkan, Oktay & Obekpa, Hephzibah Onyeje, 2023. "Examining the patterns of disaggregate energy security risk and crude oil price: the USA scenario over 1970–2040," Resources Policy, Elsevier, vol. 82(C).
    4. Kumar, Sourabh, 2023. "Evaluation and analysis of India's energy security: A policy perspective," Energy, Elsevier, vol. 278(PB).
    5. Lee, Chien-Chiang & Yahya, Farzan, 2024. "Mitigating energy instability: The influence of trilemma choices, financial development, and technology advancements," Energy Economics, Elsevier, vol. 133(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bonaccolto, G. & Caporin, M. & Gupta, R., 2018. "The dynamic impact of uncertainty in causing and forecasting the distribution of oil returns and risk," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 507(C), pages 446-469.
    2. Zhao, Jing, 2022. "Exploring the influence of the main factors on the crude oil price volatility: An analysis based on GARCH-MIDAS model with Lasso approach," Resources Policy, Elsevier, vol. 79(C).
    3. Apostolakis, George N. & Floros, Christos & Gkillas, Konstantinos & Wohar, Mark, 2021. "Financial stress, economic policy uncertainty, and oil price uncertainty," Energy Economics, Elsevier, vol. 104(C).
    4. Wei, Yu & Liu, Jing & Lai, Xiaodong & Hu, Yang, 2017. "Which determinant is the most informative in forecasting crude oil market volatility: Fundamental, speculation, or uncertainty?," Energy Economics, Elsevier, vol. 68(C), pages 141-150.
    5. Yong Jiang & Yi-Shuai Ren & Chao-Qun Ma & Jiang-Long Liu & Basil Sharp, 2018. "Does the price of strategic commodities respond to U.S. Partisan Conflict?," Papers 1810.08396, arXiv.org, revised Feb 2020.
    6. Scarcioffolo, Alexandre R. & Etienne, Xiaoli L., 2021. "Regime-switching energy price volatility: The role of economic policy uncertainty," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 336-356.
    7. Gong, Mengqi & You, Zhe & Wang, Longle & Ruan, Dapeng, 2024. "Research of the non-linear dynamic relationship between global economic policy uncertainty and crude oil prices," Journal of Asian Economics, Elsevier, vol. 90(C).
    8. Yanhong Feng & Dilong Xu & Pierre Failler & Tinghui Li, 2020. "Research on the Time-Varying Impact of Economic Policy Uncertainty on Crude Oil Price Fluctuation," Sustainability, MDPI, vol. 12(16), pages 1-24, August.
    9. Yang, Kun & Wei, Yu & Li, Shouwei & Liu, Liang & Wang, Lei, 2021. "Global financial uncertainties and China’s crude oil futures market: Evidence from interday and intraday price dynamics," Energy Economics, Elsevier, vol. 96(C).
    10. Kang, Wensheng & de Gracia, Fernando Perez & Ratti, Ronald A., 2019. "The asymmetric response of gasoline prices to oil price shocks and policy uncertainty," Energy Economics, Elsevier, vol. 77(C), pages 66-79.
    11. Lan Bai & Xiafei Li & Yu Wei & Guiwu Wei, 2022. "Does crude oil futures price really help to predict spot oil price? New evidence from density forecasting," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(3), pages 3694-3712, July.
    12. Lang, Korbinian & Auer, Benjamin R., 2020. "The economic and financial properties of crude oil: A review," The North American Journal of Economics and Finance, Elsevier, vol. 52(C).
    13. Xing, Li-Min & Zhang, Yue-Jun, 2022. "Forecasting crude oil prices with shrinkage methods: Can nonconvex penalty and Huber loss help?," Energy Economics, Elsevier, vol. 110(C).
    14. Degiannakis, Stavros & Filis, George & Panagiotakopoulou, Sofia, 2018. "Oil price shocks and uncertainty: How stable is their relationship over time?," Economic Modelling, Elsevier, vol. 72(C), pages 42-53.
    15. Xiafei Li & Yu Wei & Xiaodan Chen & Feng Ma & Chao Liang & Wang Chen, 2022. "Which uncertainty is powerful to forecast crude oil market volatility? New evidence," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(4), pages 4279-4297, October.
    16. Dong, Minyi & Chang, Chun-Ping & Gong, Qiang & Chu, Yin, 2019. "Revisiting global economic activity and crude oil prices: A wavelet analysis," Economic Modelling, Elsevier, vol. 78(C), pages 134-149.
    17. Chul-Yong Lee & Sung-Yoon Huh, 2017. "Forecasting Long-Term Crude Oil Prices Using a Bayesian Model with Informative Priors," Sustainability, MDPI, vol. 9(2), pages 1-15, January.
    18. Mehmet Balcilar & Stelios Bekiros & Rangan Gupta, 2017. "The role of news-based uncertainty indices in predicting oil markets: a hybrid nonparametric quantile causality method," Empirical Economics, Springer, vol. 53(3), pages 879-889, November.
    19. Zhenhua Liu & Zhihua Ding & Tao Lv & Jy S. Wu & Wei Qiang, 2019. "Financial factors affecting oil price change and oil-stock interactions: a review and future perspectives," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 95(1), pages 207-225, January.
    20. Szczygielski, Jan Jakub & Brzeszczyński, Janusz & Charteris, Ailie & Bwanya, Princess Rutendo, 2022. "The COVID-19 storm and the energy sector: The impact and role of uncertainty," Energy Economics, Elsevier, vol. 109(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jrpoli:v:79:y:2022:i:c:s0301420722004974. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/30467 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.