China’s Rise in the Middle East: Fuelling a Tired Dragon?

China’s hunger for natural resources is growing as the Chinese authorities try to fuel an economy in need of sustainable economic growth while it adjusts to its “new normal” growth trajectory. There is a need to reactivate an economic model that is not meeting growth level targets and remains heavily reliant on fossil fuels. The country’s energy model needs to change amidst the challenges and significant costs posed by environmental degradation. Over the last decade, the Middle East’s connections have become of paramount importance to China, but these links are quite fragile as they are fundamentally affected by significant uncertainty. The Chinese authorities face paramount challenges as they engage with a very conflicting region characterised by increasing political frictions, armed conflicts, and escalating instability. These difficulties suggest the need for a highly cautious strategy as the Chinese authorities keep progressing with the redefinition of their energy model centered on stability and security as having a paramount importance to a country that needs to fuel its economic model. However, coal dependency, environmental concerns and lower economic growth levels have pushed the country to reconsider its energy model towards more sustainable approaches. As the government seeks energy sustainability, the research findings suggest that the country’s new energy model is shifting towards oil;this raises concerns regarding China’s national security interests and sustainable economic growth goals. © 2022, The Author(s), under exclusive license to Springer Nature Switzerland AG.

The Russia-Saudi Arabia oil price war during the COVID-19 pandemic.

The COVID-19 pandemic damaged crude oil markets and amplified the consequences of uncertainty stemming from the Russia-Saudi Arabia oil price war in March-April of 2020. We investigate the impacts of the oil price war on global crude oil markets. By doing so, we use the daily futures and spot prices in three major crude oil markets - West Texas Intermediate, European Brent, and Oman - to perform a systematic analysis of the impacts of the oil price war on them. The event study method, a well-established analytical tool to measure the impacts of a given event on markets, is used in this study. The results indicate that information leakage plays an important role in the impacts of the price war. The outbreak of and truce following the price war have asymmetrical impacts on the markets; negative impacts generated by information leakage during the outbreak are generally more durable than the positive ones it generated during the truce. Furthermore, the magnitude of the impacts on futures markets is negatively correlated with the time-to-maturity of futures. Finally, negative crude oil prices affect West Texas Intermediate crude oil markets the most. Our findings generally show that market participants could perceive and assimilate market changes and adjust their expectations, which restrained the impacts that should have occurred within the oil price war.

The historic oil price fluctuation during the Covid-19 pandemic: What are the causes?

On 20 April 2020, the West Texas Intermediate (WTI) crude oil price dropped to negative levels for the first time in history. This study examines the factors underlying the historic oil price fluctuation during the Covid-19 pandemic. The autoregressive distributed lag (ARDL) bounds testing approach incorporating a structural break is applied to the daily series from 17 January to 14 September 2020 to analyze long-run relationships and short-run dynamics. The results reveal that increases in Covid-19 pandemic cases, US economic policy uncertainty, and expected stock market volatility contributed to the fall in the WTI crude oil price, whereas the fall in the global stock markets appears to significantly reduce the fall. Furthermore, the Russia-Saudi Arabia oil price war and speculation on oil futures are shown to play a critical part in the collapse of the oil markets. The findings are consistent with our expectations. Although it is reasonable to assume that the solution to this oil crisis is a pick-up in global oil demand, which will occur only when the novel coronavirus is defeated, this study proposes policy recommendations to cope with the current oil price crash.