IDEAS home Printed from https://ideas.repec.org/p/rza/wpaper/108.html
   My bibliography  Save this paper

Application of a Multi-Criteria Integrated Portfolio Model for Quantifying South Africa’s Crude Oil Import Risk

Author

Listed:
  • Hammed Amusa
  • Njeri Wabiri
  • Krish Chetty

Abstract

e availability of secure energy resources at sustainable quantities and affordable prices is fundamental to South Africa’s current objective of enhancing and sustaining its current growth trajectory. Economic reforms, since the early 1990s, have led to the economy growing at an average rate of almost 5% per annum. A major consequence of this strong growth is the rapid increase in domestic demand for oil energy. With small amounts of proven oil reserves, the rise in oil demand as an essential energy source has prompted an increasing reliance on external sources for domestic crude oil supplies. High oil prices, the extent of proven oil reserves, instability in major oil producing regions and the rise in ‘oil-nationalism’ have raised serious concerns about the security of South Africa’s oil supplies. In this context, a comprehensive understanding of oil import security risks is critical as it will guide in the formulation of energy policy framework aimed at alleviating the impact of oil import risks. This study utilises portfolio theory to provide quantitative measures of systematic and specific risks of South Africa’s crude oil imports over the period 1994 to 2007. It explains the relationship between supply sources diversification and oil energy security risks, and highlights the impact of different crude oil import policy adjustment strategies on the total crude oil import risk for South Africa. The results for the adjustment strategies show that: (a) a policy of having the same quantity of oil imported every month or a constant quantity of oil imported from the supply regions reduces both systematic and specific risks of oil import portfolio, and (b) a reduction in specific risks of South Africa’s oil imports can be achieved if some of the Middle Eastern supplies can be diversified to less risk regions of Europe, North America and Russia.

Suggested Citation

  • Hammed Amusa & Njeri Wabiri & Krish Chetty, 2008. "Application of a Multi-Criteria Integrated Portfolio Model for Quantifying South Africa’s Crude Oil Import Risk," Working Papers 108, Economic Research Southern Africa.
  • Handle: RePEc:rza:wpaper:108
    as

    Download full text from publisher

    File URL: http://www.econrsa.org/node/132
    Download Restriction: no

    More about this item

    Keywords

    Oil Import Risks; Portfolio Theory; Analytical Hierarchy Process;

    JEL classification:

    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
    • F10 - International Economics - - Trade - - - General
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

    Statistics

    Access and download statistics

    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:rza:wpaper:108. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Charles Tanton). General contact details of provider: http://edirc.repec.org/data/ersacza.html .

    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.

    We have no references for this item. You can help adding them by using 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.