Does crude oil price respond to US oil and gas industry value chain economics Online publication date: Thu, 29-Jul-2021
by Chamil W. Senarathne; Jianguo Wei
International Journal of Oil, Gas and Coal Technology (IJOGCT), Vol. 27, No. 4, 2021
Abstract: This paper examines whether the crude oil price responds to industry value chain economics in the oil and gas industry of the USA. The EVA is negatively and significantly related to crude oil price and this asymmetric relationship is caused by the cost implications in the value chain operation. Industry production of crude oil (IPD-mining) is negatively associated with crude oil price. There is a unidirectional Granger-causality running from EVA to oil price and policy uncertainty to EVA. VEC estimation results also suggest that there is a significant short- and long-term interaction effect on EVA from policy uncertainty. The responses of oil price to EVA (short-run) and EVA to policy uncertainty are highly significant. Shocks to oil price and policy uncertainty cause weaker fluctuations in EVA, and the variation of the fluctuations in EVA due to the shocks to oil price is considerably significant. [Received: June 1, 2019; Accepted: August 7, 2020]
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