Long-term memory dynamics of crude oil price spread in non-dollar countries under the influence of exchange rates

The non-US countries’ oil trade will be affected by the combined fluctuations in oil price and exchange rate. For China, the world’s largest oil importer, any slight fluctuations in oil price or exchange rate will significantly impact his oil import. Therefore, this paper firstly quantified the oil...

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Bibliographic Details
Published in:Energy (Oxford) 2019-09, Vol.182, p.753-764
Main Authors: Liu, Siyao, Fang, Wei, Gao, Xiangyun, An, Feng, Jiang, Meihui, Li, Yang
Format: Article
Language:English
Subjects:
Algorithms
Complex network
Crude oil
Crude oil prices
Currencies
Exchange rate
Fluctuations
Foreign exchange rates
Fractal models
Horizontal visibility graph
Hurst
Imports
Long term memory
Statistical analysis
Statistical tests
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Summary:The non-US countries’ oil trade will be affected by the combined fluctuations in oil price and exchange rate. For China, the world’s largest oil importer, any slight fluctuations in oil price or exchange rate will significantly impact his oil import. Therefore, this paper firstly quantified the oil price spread between nominal price and real price corresponding to its domestic currency to show such impact. Secondly, we conducted statistical tests on the price spread under the circumstance when China imports from Russia, Oman, Dubai, WTI and Brent, and we introduced the fractal model to explore the nonlinear characteristics of the five price spread series. The five series all showed obvious long-term memory characteristics. Thirdly, time-varying memory series were constructed to further explore their dynamic features and the results showed they could forewarn the reversal trend of price spread series. Finally, the complex network is applied to analyze the dynamical mechanism of time-varying memory series and further explore the laws of the price spread. The algorithm could provide references for policymakers to anticipate the general trend of price spread and compare the price advantage of the crude oil. •The combined volatility of crude oil price and exchange rate affects trade cost.•We explored the long-term memory of the crude oil import payment pressure index.•The sliding window was applied to explore the time-varying memory.•We detected the evolution characteristics and mechanism of the time-varying memory.
ISSN:0360-5442
1873-6785
DOI:10.1016/j.energy.2019.06.072