Rising Crude Prices’ Impact – To understand the impact of the volatility of crude oil market over the Singapore economy and also on the Singapore oil companies

Ooi, Ee Sun (2009) Rising Crude Prices’ Impact – To understand the impact of the volatility of crude oil market over the Singapore economy and also on the Singapore oil companies. [Dissertation (University of Nottingham only)] (Unpublished)

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Abstract

Recent economic and geopolitical events have significantly impacted the crude oil

prices worldwide with US crude reaching record highs above $78 dollars per barrel

on July 14, 2006. Although the consequences and transmission mechanisms of oil

price shocks have been investigated to some extent for developed economies, the

impact volatility and rise of oil price on developing countries and emerging market

economies (EMEs) have yet to be explored. Established in 1969, Singapore

Petroleum Company Ltd (SPC) has become one of the lead players in the local oil

industry of Singapore. SPC provides its services in the areas of oil and gas

exploration, refining, terminalling and distribution, marketing and trading of crude

and refined petroleum products and is the only independent oil refiner in Singapore.

Like the rest of the world, the impact of volatility in crude oil prices, SPC has also

impacted significantly by swings in refining margins which arise from the interplay

of demand and supply for crude oil and refined products.

This study aimed at exploring the impact of volatility of crude oil prices on the

Singaporean economy in general and particularly on the Singapore oil companies.

For this purpose, the meta-analysis method was utilized in order to explore and

examine the relevant data and research on the topic and perform a meta-analysis of

this data. Data on crude oil, volatility in oil prices and its influence on crude oil

companies in Singapore were researched. The research criteria covered the period

from 1995 to data and examined the trends in oil markets of USA, Gulf States and

the Singapore Petroleum Company Ltd (SPC). First of all, the mechanism of crude

oil prices was examined which revealed that in the late 1980s, price formulas were adopted to set export prices. This involved use of three indices for sales of Middle

Eastern crudes to various regions: West Texas Intermediate for sales to the US, Brent

for sales to Europe, and a combination of Dubai and Oman for sales to the Asia-

Pacific region. In general, marker crude would fulfill certain implicit criteria in that it

should be a good representative of all the alternative crudes available to buyers in the

region in terms of gravity and sulfur content, produced in significant volumes, and

should be liquid, i.e., significantly traded in the physical market. However, such

mechanism is not going to be sustained for long due to the fact that an increasing

need to cut costs by the Asian refiners would result in the need for more competitive

deals. Furthermore, the increasing trend of imports of Atlantic Basin crudes (which

are priced off Brent) into Asia-Pacific countries may further pressure Middle Eastern

producers to reduce, if not remove, the Eastern Premium. Being a small economy

Singapore is a price taker in global trade, that is why, fluctuations in crude oil prices

have powerful effects on the economy.

Item Type: Dissertation (University of Nottingham only)
Depositing User: EP, Services
Date Deposited: 27 Jan 2010 13:58
Last Modified: 24 Oct 2016 06:44
URI: http://eprints.nottingham.ac.uk/id/eprint/22697

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