Oil Price Volatility, Economic Growth and the Hedging Role of Renewable Energy
This paper investigates the adverse effects of oil price volatility on economic activity and the extent to which countries can hedge against such effects by using renewable energy. By considering the Realized Volatility of oil prices, rather than f...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2013
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| Online Access: | http://documents.worldbank.org/curated/en/2013/09/18260093/oil-price-volatility-economic-growth-hedging-role-renewable-energy http://hdl.handle.net/10986/15829 |
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okr-10986-15829 |
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| recordtype |
oai_dc |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
ADVERSE EFFECTS ALTERNATIVE ENERGIES APPROACH AVAILABILITY BALANCE BILATERAL TRADE BUSINESS INVESTMENTS CLIMATE CLIMATE CHANGE CLIMATE POLICIES COAL COMMODITIES COMMODITY COMMODITY MARKETS COMMODITY PRICE CONSUMER PRICE CONSUMER PRICE INDICES CRUDE OIL CRUDE OIL IMPORTS CRUDE OIL PRICE CURRENCY DEMAND FOR OIL DEVELOPING COUNTRIES DOMESTIC EXCHANGE DOMESTIC INFLATION DOMESTIC OIL DOMESTIC OIL CONSUMPTION DOMESTIC OIL PRODUCTION DOMESTIC PRODUCTION ECONOMIC ACTIVITY ECONOMIC BENEFITS ECONOMIC GROWTH ECONOMIC INDICATORS ECONOMIC STRUCTURES ECONOMIC UNCERTAINTY EMERGING ECONOMIES EMPLOYMENT ENERGY DEMAND ENERGY ECONOMICS ENERGY INVESTMENTS ENERGY MARKETS ENERGY MIX ENERGY NEEDS ENERGY POLICY ENERGY PORTFOLIO ENERGY PRICES ENERGY SOURCE ENERGY SOURCES EXCHANGE RATE EXCHANGE RATE FLUCTUATIONS EXOGENOUS SUPPLY EXPOSURE EXTERNAL MARKETS FACTOR PRICE FEDERAL RESERVE FEDERAL RESERVE BANK FINANCIAL ANALYSIS FISCAL POLICIES FISCAL POLICY FOSSIL FOSSIL FUEL FOSSIL FUELS FUEL FUEL PRODUCTION FUTURE PRICE GAS GEOTHERMAL POWER GLOBAL ECONOMY GLOBAL MARKET GLOBAL MARKETS GLOBAL OIL MARKETS HYDROPOWER INFLATION INPUT PRICES INTERNATIONAL MARKETS INTERNATIONAL TRADING INVESTMENT DECISIONS LABOR MARKET LOWER PRICE MARKET FLUCTUATIONS MARKET PRICE MARKET PRICES MARKET REGULATION MARKET RETURNS MARKET VOLATILITY MONETARY ECONOMICS MONETARY POLICY NATURAL GAS NET OIL NUCLEAR ENERGY NUCLEAR POWER OIL OIL EXPORTER OIL EXPORTERS OIL EXPORTS OIL IMPORTER OIL IMPORTS OIL MARKETS OIL PRICE OIL PRICES OIL PRODUCING OIL PRODUCING COUNTRIES OIL SHOCKS OUTPUT PETROLEUM PETROLEUM IMPORTS PETROLEUM INDUSTRY POLICY MAKERS POLITICAL ECONOMY PORTFOLIOS POWER PRICE CHANGE PRICE CHANGES PRICE DECREASES PRICE FLUCTUATIONS PRICE INCREASE PRICE INCREASES PRICE INDEX PRICE MOVEMENTS PRICE OF OIL PRICE STABILITY PRICE UNCERTAINTY PRICE VOLATILITY PRICES OF COAL PRODUCTION COSTS RENEWABLE ENERGIES RENEWABLE ENERGY RENEWABLE POWER RISK MANAGEMENT SCENARIOS SOURCE OF ENERGY SPOT MARKET STOCK MARKET SUBSTITUTE SUPPLY SHOCKS SURPLUS SUSTAINABLE DEVELOPMENT SUSTAINABLE ENERGY TAX TRADING ACTIVITIES UNCERTAINTIES VOLATILE PRICES WORLD ECONOMY WORLD ENERGY |
| spellingShingle |
ADVERSE EFFECTS ALTERNATIVE ENERGIES APPROACH AVAILABILITY BALANCE BILATERAL TRADE BUSINESS INVESTMENTS CLIMATE CLIMATE CHANGE CLIMATE POLICIES COAL COMMODITIES COMMODITY COMMODITY MARKETS COMMODITY PRICE CONSUMER PRICE CONSUMER PRICE INDICES CRUDE OIL CRUDE OIL IMPORTS CRUDE OIL PRICE CURRENCY DEMAND FOR OIL DEVELOPING COUNTRIES DOMESTIC EXCHANGE DOMESTIC INFLATION DOMESTIC OIL DOMESTIC OIL CONSUMPTION DOMESTIC OIL PRODUCTION DOMESTIC PRODUCTION ECONOMIC ACTIVITY ECONOMIC BENEFITS ECONOMIC GROWTH ECONOMIC INDICATORS ECONOMIC STRUCTURES ECONOMIC UNCERTAINTY EMERGING ECONOMIES EMPLOYMENT ENERGY DEMAND ENERGY ECONOMICS ENERGY INVESTMENTS ENERGY MARKETS ENERGY MIX ENERGY NEEDS ENERGY POLICY ENERGY PORTFOLIO ENERGY PRICES ENERGY SOURCE ENERGY SOURCES EXCHANGE RATE EXCHANGE RATE FLUCTUATIONS EXOGENOUS SUPPLY EXPOSURE EXTERNAL MARKETS FACTOR PRICE FEDERAL RESERVE FEDERAL RESERVE BANK FINANCIAL ANALYSIS FISCAL POLICIES FISCAL POLICY FOSSIL FOSSIL FUEL FOSSIL FUELS FUEL FUEL PRODUCTION FUTURE PRICE GAS GEOTHERMAL POWER GLOBAL ECONOMY GLOBAL MARKET GLOBAL MARKETS GLOBAL OIL MARKETS HYDROPOWER INFLATION INPUT PRICES INTERNATIONAL MARKETS INTERNATIONAL TRADING INVESTMENT DECISIONS LABOR MARKET LOWER PRICE MARKET FLUCTUATIONS MARKET PRICE MARKET PRICES MARKET REGULATION MARKET RETURNS MARKET VOLATILITY MONETARY ECONOMICS MONETARY POLICY NATURAL GAS NET OIL NUCLEAR ENERGY NUCLEAR POWER OIL OIL EXPORTER OIL EXPORTERS OIL EXPORTS OIL IMPORTER OIL IMPORTS OIL MARKETS OIL PRICE OIL PRICES OIL PRODUCING OIL PRODUCING COUNTRIES OIL SHOCKS OUTPUT PETROLEUM PETROLEUM IMPORTS PETROLEUM INDUSTRY POLICY MAKERS POLITICAL ECONOMY PORTFOLIOS POWER PRICE CHANGE PRICE CHANGES PRICE DECREASES PRICE FLUCTUATIONS PRICE INCREASE PRICE INCREASES PRICE INDEX PRICE MOVEMENTS PRICE OF OIL PRICE STABILITY PRICE UNCERTAINTY PRICE VOLATILITY PRICES OF COAL PRODUCTION COSTS RENEWABLE ENERGIES RENEWABLE ENERGY RENEWABLE POWER RISK MANAGEMENT SCENARIOS SOURCE OF ENERGY SPOT MARKET STOCK MARKET SUBSTITUTE SUPPLY SHOCKS SURPLUS SUSTAINABLE DEVELOPMENT SUSTAINABLE ENERGY TAX TRADING ACTIVITIES UNCERTAINTIES VOLATILE PRICES WORLD ECONOMY WORLD ENERGY Rentschler, Jun E. Oil Price Volatility, Economic Growth and the Hedging Role of Renewable Energy |
| geographic_facet |
East Asia and Pacific Europe and Central Asia South Asia |
| relation |
Policy Research Working Paper;No. 6603 |
| description |
This paper investigates the adverse
effects of oil price volatility on economic activity and the
extent to which countries can hedge against such effects by
using renewable energy. By considering the Realized
Volatility of oil prices, rather than following the standard
approach of considering oil price shocks in levels, the
effects of factor price uncertainty on economic activity are
analyzed. Sample countries represent developed and
developing, oil importing and exporting and
service/industry-based economies (United States, Japan,
Germany, South Korea, India, and Malaysia) and thus
complement the standard literature's analysis of
Western OECD countries. In a vector auto-regressive setting,
Granger causality tests, impulse response functions, and
variance decompositions show that oil price volatility has
more-adverse effects in all sample countries than oil price
shocks alone can explain. The paper finds that the
sensitivity to oil price volatility varies widely across
countries and discusses various factors which may determine
the level of sensitivity (such as sectoral composition and
the energy mix). This implies that the standard approach of
solely considering net oil importer-exporter status is not
sufficient. Simulations of volatility shocks in hypothetical
energy mixes (with increased renewable shares) illustrate
the potential economic benefits resulting from efforts to
disconnect the macroeconomy from volatile commodity markets.
It is concluded that expanding renewable energy can in
principle reduce an economy's vulnerability to oil
price volatility, but a country-specific analysis would be
necessary to identify concrete policy measures. Overall, the
paper provides an additional rationale for reducing exposure
and vulnerability to oil price volatility for the sake of
economic growth. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Rentschler, Jun E. |
| author_facet |
Rentschler, Jun E. |
| author_sort |
Rentschler, Jun E. |
| title |
Oil Price Volatility, Economic Growth and the Hedging Role of Renewable Energy |
| title_short |
Oil Price Volatility, Economic Growth and the Hedging Role of Renewable Energy |
| title_full |
Oil Price Volatility, Economic Growth and the Hedging Role of Renewable Energy |
| title_fullStr |
Oil Price Volatility, Economic Growth and the Hedging Role of Renewable Energy |
| title_full_unstemmed |
Oil Price Volatility, Economic Growth and the Hedging Role of Renewable Energy |
| title_sort |
oil price volatility, economic growth and the hedging role of renewable energy |
| publisher |
World Bank, Washington, DC |
| publishDate |
2013 |
| url |
http://documents.worldbank.org/curated/en/2013/09/18260093/oil-price-volatility-economic-growth-hedging-role-renewable-energy http://hdl.handle.net/10986/15829 |
| _version_ |
1764432092992634880 |
| spelling |
okr-10986-158292021-04-23T14:03:27Z Oil Price Volatility, Economic Growth and the Hedging Role of Renewable Energy Rentschler, Jun E. ADVERSE EFFECTS ALTERNATIVE ENERGIES APPROACH AVAILABILITY BALANCE BILATERAL TRADE BUSINESS INVESTMENTS CLIMATE CLIMATE CHANGE CLIMATE POLICIES COAL COMMODITIES COMMODITY COMMODITY MARKETS COMMODITY PRICE CONSUMER PRICE CONSUMER PRICE INDICES CRUDE OIL CRUDE OIL IMPORTS CRUDE OIL PRICE CURRENCY DEMAND FOR OIL DEVELOPING COUNTRIES DOMESTIC EXCHANGE DOMESTIC INFLATION DOMESTIC OIL DOMESTIC OIL CONSUMPTION DOMESTIC OIL PRODUCTION DOMESTIC PRODUCTION ECONOMIC ACTIVITY ECONOMIC BENEFITS ECONOMIC GROWTH ECONOMIC INDICATORS ECONOMIC STRUCTURES ECONOMIC UNCERTAINTY EMERGING ECONOMIES EMPLOYMENT ENERGY DEMAND ENERGY ECONOMICS ENERGY INVESTMENTS ENERGY MARKETS ENERGY MIX ENERGY NEEDS ENERGY POLICY ENERGY PORTFOLIO ENERGY PRICES ENERGY SOURCE ENERGY SOURCES EXCHANGE RATE EXCHANGE RATE FLUCTUATIONS EXOGENOUS SUPPLY EXPOSURE EXTERNAL MARKETS FACTOR PRICE FEDERAL RESERVE FEDERAL RESERVE BANK FINANCIAL ANALYSIS FISCAL POLICIES FISCAL POLICY FOSSIL FOSSIL FUEL FOSSIL FUELS FUEL FUEL PRODUCTION FUTURE PRICE GAS GEOTHERMAL POWER GLOBAL ECONOMY GLOBAL MARKET GLOBAL MARKETS GLOBAL OIL MARKETS HYDROPOWER INFLATION INPUT PRICES INTERNATIONAL MARKETS INTERNATIONAL TRADING INVESTMENT DECISIONS LABOR MARKET LOWER PRICE MARKET FLUCTUATIONS MARKET PRICE MARKET PRICES MARKET REGULATION MARKET RETURNS MARKET VOLATILITY MONETARY ECONOMICS MONETARY POLICY NATURAL GAS NET OIL NUCLEAR ENERGY NUCLEAR POWER OIL OIL EXPORTER OIL EXPORTERS OIL EXPORTS OIL IMPORTER OIL IMPORTS OIL MARKETS OIL PRICE OIL PRICES OIL PRODUCING OIL PRODUCING COUNTRIES OIL SHOCKS OUTPUT PETROLEUM PETROLEUM IMPORTS PETROLEUM INDUSTRY POLICY MAKERS POLITICAL ECONOMY PORTFOLIOS POWER PRICE CHANGE PRICE CHANGES PRICE DECREASES PRICE FLUCTUATIONS PRICE INCREASE PRICE INCREASES PRICE INDEX PRICE MOVEMENTS PRICE OF OIL PRICE STABILITY PRICE UNCERTAINTY PRICE VOLATILITY PRICES OF COAL PRODUCTION COSTS RENEWABLE ENERGIES RENEWABLE ENERGY RENEWABLE POWER RISK MANAGEMENT SCENARIOS SOURCE OF ENERGY SPOT MARKET STOCK MARKET SUBSTITUTE SUPPLY SHOCKS SURPLUS SUSTAINABLE DEVELOPMENT SUSTAINABLE ENERGY TAX TRADING ACTIVITIES UNCERTAINTIES VOLATILE PRICES WORLD ECONOMY WORLD ENERGY This paper investigates the adverse effects of oil price volatility on economic activity and the extent to which countries can hedge against such effects by using renewable energy. By considering the Realized Volatility of oil prices, rather than following the standard approach of considering oil price shocks in levels, the effects of factor price uncertainty on economic activity are analyzed. Sample countries represent developed and developing, oil importing and exporting and service/industry-based economies (United States, Japan, Germany, South Korea, India, and Malaysia) and thus complement the standard literature's analysis of Western OECD countries. In a vector auto-regressive setting, Granger causality tests, impulse response functions, and variance decompositions show that oil price volatility has more-adverse effects in all sample countries than oil price shocks alone can explain. The paper finds that the sensitivity to oil price volatility varies widely across countries and discusses various factors which may determine the level of sensitivity (such as sectoral composition and the energy mix). This implies that the standard approach of solely considering net oil importer-exporter status is not sufficient. Simulations of volatility shocks in hypothetical energy mixes (with increased renewable shares) illustrate the potential economic benefits resulting from efforts to disconnect the macroeconomy from volatile commodity markets. It is concluded that expanding renewable energy can in principle reduce an economy's vulnerability to oil price volatility, but a country-specific analysis would be necessary to identify concrete policy measures. Overall, the paper provides an additional rationale for reducing exposure and vulnerability to oil price volatility for the sake of economic growth. 2013-09-25T21:00:13Z 2013-09-25T21:00:13Z 2013-09 http://documents.worldbank.org/curated/en/2013/09/18260093/oil-price-volatility-economic-growth-hedging-role-renewable-energy http://hdl.handle.net/10986/15829 English en_US Policy Research Working Paper;No. 6603 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research East Asia and Pacific Europe and Central Asia South Asia |