Research Article
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Investigating the effects of climate policy uncertainty on the US petroleum markets

Year 2022, Volume: 7 Issue: 1, 1 - 20, 27.06.2022

Mustafa Hamad Ameen , Aslı Afşar

Abstract

The uncertainty of climate policy and its impact on the petroleum markets has attracted the attention of many researchers over the past two decades. Many research works have been conducted regarding the reactions of each variable to the other and the present study aims to investigate the effects of climate policy uncertainty on the US petroleum markets by taking the Climate Policy Uncertainty Index (CPU) and the Petroleum Markets EMV tracker data (PEMV) based on monthly data which starts from Jan 2000 to March 2021. We employ multiple tests by using the VAR model to analyze the collected data. First, the results of the Granger causality test show no causality cause between the CPU and PEMV indices. Second, the outcomes of the Impulse response test show only the reactions come to the variables themselves positively but provide no meaning to the shocks of each variable to the other one. Lastly, the results of the variance decomposition test imply that the variables highly lagged with their dynamics which is about 98 percentile for each variable. 

Keywords

CPU index PEMV index VAR model

Supporting Institution

Non

Project Number

Non

References

  • [1] Chenetad, H., Collinsb, J. R., Lervenc, F. “Finance, climate-change and radical uncertainty: Towards a precautionary approach to financial policy”, Ecological Economics 2021: 183; 2-14.
  • [2] Meah, N., “Climate uncertainty and policy making—what do policy makers”, Regional Environmental Change 2019: 1611–1621.
  • [3] Manning, M., Petit, M., Easterling, D., Murphy, J., Patwardhan, A., Rogner, H.-H., et al. “IPPC Workshop on Describing Scientific Uncertainties in Climate Change to Support Analysis of Risk and of Options”, Geneva: Intergovernmental Panel on Climate Change IPCC 2004.
  • [4] Hulme, M. "Why we disagree: understanding controversy, inaction and opportunity", Cambridge: Cambridge University Press 2009.
  • [5] Painter, J. "Poles Apart: The international reporting of climate scepticism", University of Oxford, UK: Reuters Institute for the Study of Journalism 2011.
  • [6] Aven, T., Renn, O. "An Evaluation of the Treatment of Risk and Uncertaintiesin the IPCC Reports on Climate Change", Risk Analysis 2015: 701-712.
  • [7] APSC. "Tackling wicked problems: a public policy perspective", 2016: August 31. http://www.apsc.gov.au/__data/assets/pdf_file/0005/6386/wickedproblems.pdf.
  • [8] Lawson, N. "The Trouble With Climate Change" London: The Global Warming Policy Foundation 2014.
  • [9] Forest, C. E. "Quantifying Uncertainties in Climate System Properties with the Use of Recent Climate Observations", Science 2002: January 4; 113-117.
  • [10] IEA, I. "Climate Policy Uncertainty", Paris: International Energy Agency 2007.
  • [11] Schneider, S. H., Kuntz-Duriseti, K. "Uncertainty and Climate Change Policy", Island press, Washington D.C., USA: In: Schneider SH, Rosencraz A, Nile JO (eds) climate change, 2002.
  • [12] Doshi, S. "The Oil and Gas Industry’s Dangerous Answer to Climate Change", 2021: August 25. https://americanprogress.org.
  • [13] EIA, U. 2021: October 5. https://www.eia.gov: https://www.eia.gov/energyexplained/natural-gas/factors-affecting-natural-gas-prices.pp
  • [14] Krauss, C., Eavis, P. "Energy Prices Spike as Producers Worry Over Pandemic and Climate", New York 2021. https://www.nytimes.com/2021/10/04/business/energy-environment/oil-and-gas-prices- clean-energy.html.
  • [15] Frankel, J. "High Oil Prices Can Help the Environment", Cambridge 2021: 11 25. https://www.project-syndicate.org/bigpicture/burning-energy .
  • [16] Keane, P. "How the oil industry made us doubt climate change", BBC News 2020: September 20. https://www.bbc.com/news/stories-53640382.
  • [17] Pattee, E. "The scientists hired by big oil who predicted the climate crisis long ago", The Guardian 2021: July 2. https://www.theguardian.com/environment/2021/jul/02/scientists-climate-crisis- big-oil-climate-crimes.
  • [18] Dunn, J. P. "Despite oil industry howling, companies are awash in public lands drilling permits", WestWise 2021: August 2021. https://medium.com/westwise.
  • [19] COP26. COP26 Explanied: Glasgow 2021: https://ukcop26.org/cop26-goals/.
  • [20] Gavriilidis, K. "Measuring Climate Policy Uncertainty", SSRN 2021. https://ssrn.com/abstract=3847388., 1-9.
  • [21] EPU. "Economic Policy Uncertainty", 2021: November 25. https://www.policyuncertainty.com/EMV_monthly.html.
  • [22] Duva, N. "7 industries at greatest risk from climate change", CNBC.Com 2014: October 22. https://www.cnbc.com/2014/10/22/7-industries-at-greatest-risk-from-climate-change.html.
  • [23] Åberg, A., Benton, T. G., Froggatt, A. COP26: "What happened, What does this dean, What happens next?" London: Chatham House 2021.
  • [24] Perkins, R. "Global fossil fuel demand set for 2025 peak under net-zero pledges", IEA 2021: October 13. https://www.spglobal.com: https://www.spglobal.com/
  • [25] Levy , D. L., Kolk, A. "Strategic Responses to Global Climate Change: Conflicting Pressures on Multinationals in the Oil Industry", Business and Politics 2002: 275-300.
  • [26] Rozenberg, J., Hallegatte , S., Vogt-Schilb, A., Sassi , O., Guivarc, C., Waisman, H., et al. "Climate policies as a hedge against the uncertainty on future oil supply", The journal of Climatic Change 2010.
  • [27] Maisonnave, H., Pycroft, J., Saveyn, B., Ciscar, J.-C. "Does climate policy make the EU economy more resilient to oil price rises?", The Journal of Energy Policy 2012: 172-179.
  • [28] Fertel, C., Bahn, O., Vaillancourt, K., Waaub, J.-P. "Canadian energy and climate policies: A SWOT analysis in search of federal/provincial coherence", Journal of Energy Policy 2013: 1139-1150.
  • [29] Liu, M.-L., Ji, Q., Fan, Y. "How does oil market uncertainty interact with other markets? An empirical analysis of implied volatility index", The International Journal of Energy 2013: 860-868.
  • [30] Klevnäs, P., Stern, N., Frejova, J. "Oil Prices and the New Climate Economy", 2015. http://newclimateeconomy.report.
  • [31] Paterson, R., Kumar, L., Taylor, S., Lima, N. "Future climate effects on suitability for growth of oil palms in Malaysia and Indonesia", Scientific Reports 2015:5 ; 1-11.
  • [32] Bauer, N., Mouratiadou , I., Luderer , G., Baumstark, L., Brecha , R. J., Edenhofer , O., et al. "Global fossil energy markets and climate change mitigation – an analysis with REMIND", Climate Change 2016: 69–82.
  • [33] Aloui, R., Gubta, R., Millier, S. M. "Uncertainty and Crude Oil Returns", Journal of Energy Economics 2016: 92-100.
  • [34] Fæhn, T., Hagem, C., Lindholt, L., Mæland, S., & Rosendahl, K. E. "Climate Policies in a Fossil Fuel Producing Country: Demand versus Supply Side Policies", The Journal of Energy 2017: 38; 77-102.
  • [35] Erickson, P., Lazarus, M., Piggot, G. "Limiting fossil fuel production as the next big step in climate policy", The Journal of Nature Climate Change 2018: 8; 1037-1043.
  • [36] Zou, X. "VECM Model Analysis of Carbon Emissions, GDP, and International Crude Oil Prices", The Journal of Hindawi, Discrete Dynamics in Nature and Society 2018: 2-11.
  • [37] Mercure, J. -F., Pollitt , H., Viñu, J. E., Viñuales, J. E., Edwards, N. R., Holden, P. B., et al. "Macroeconomic impact of stranded fossil fuel assets", The Journal of New Climate Change 2018: 8; 588–593.
  • [38] Holden, E. "How the oil industry has spent billions to control the climate change conversation", Washington 2020. https://www.theguardian.com.
  • [39] Worland, J. "The Reason Fossil Fuel Companies Are Finally Reckoning With Climate Change", 2020. https://time.com.
  • [40] Abumunshar, M., Aga, M., & Samour, A. "Oil Price, Energy Consumption, and CO2 Emissions in Turkey. New Evidence from a Bootstrap ARDL Test", The Journal of Energies 2020: 2-15.
  • [41] Maghyereh, A., Abdoh, H. "Asymmetric effects of oil price uncertainty on corporate investment", The Journal of Energy Economics 2020: 2-18.
  • [42] Demir, C. "Macroeconomic Determinants of Stock Market Fluctuations: The Case of BIST-100", Journal of Economies 2019: 8-9.
  • [43] Nam, K. "Investigating the effect of climate uncertainty on global commodity markets", The Journal of Energy Economics 2021: 2-14.
  • [44] Fried, S., Novan, K., Peterman, W. B. "The Macro Effects of Climate Policy Uncertainty", Federal Reserve Bank of San Francisco 2021: 1-48.
  • [45] Wei, P., Li, Y., Ren, X., & Duan, K. "Crude oil price uncertainty and corporate carbon emissions", Environ Sci Pollut Res 2021. https://doi.org/10.1007/s11356-021-15837-8.
  • [46] COP26. COP26 Explanied. Glasgow 2021. https://ukcop26.org/cop26-goals/.
  • [47] White House. Briefing Room 2021: November 23. https://www.whitehouse.gov/briefing-room/statements-releases/2021/11/23/president-biden-announces-release-from-the-strategic- petroleum-reserve-as-part-of-ongoing-efforts-to-lower-prices-and-address-lack-of-supply-around-the-world/
  • [48] WHO. "World Health Organization", 2021: November 28. https://www.who.int/news/item/28-11-2021-update-on-omicron.
  • [49] Lawler, A. Commodities 2021: November 29. https://www.reuters.com/markets/commodities/oil-recoups-losses-friday-focusing-omicron-spread-iran-talks-2021-11-29/ adresinden alınmıştır.
  • [50] McGreal, C. The Guardian 2021: 19 July. https://www.theguardian.com/environment/2021/jul/19/big-oil-climate-crisis-lobby-group-api.
  • [51] Xu, B., Fu , R., Lau, C. K. "Energy Market Uncertainty and the Impact on the Crude Oil Prices", Journal of Environmental Management 2021:1-32.
  • [52] Doshi, S. "The Oil and Gas Industry’s Dangerous Answer to Climate Change", 2021: August 25. https://americanprogress.org.
  • [53] Sommer, J. "Big Oil Takes a Beating, but Its Investors Are Riding High", New York 2021. https://www.nytimes.com.
  • [54] Eviews. 2021. http://www.eviews.com/home.html: http://www.eviews.com/home.html
  • [55] Dickey, D. A., Fuller, W. A. "Distribution of the Estimators for Autoregressive Time Series With a Unit Root", Journal of the American Statistical Association 1979: 427-431.
  • [56] Granger, C. E. "Co-Integration and Error Correction: Representation, Estimation, and Testing", The Econometric Society 1987: 251-276.
  • [57] Koop, G., Pesaran, M., Potter, S. M. "Impulse response analysis in nonlinear multivariate models", Journal of Econometrics, 1996: 74; 119-147.

Year 2022, Volume: 7 Issue: 1, 1 - 20, 27.06.2022

Mustafa Hamad Ameen , Aslı Afşar

Abstract

Project Number

Non

References

  • [1] Chenetad, H., Collinsb, J. R., Lervenc, F. “Finance, climate-change and radical uncertainty: Towards a precautionary approach to financial policy”, Ecological Economics 2021: 183; 2-14.
  • [2] Meah, N., “Climate uncertainty and policy making—what do policy makers”, Regional Environmental Change 2019: 1611–1621.
  • [3] Manning, M., Petit, M., Easterling, D., Murphy, J., Patwardhan, A., Rogner, H.-H., et al. “IPPC Workshop on Describing Scientific Uncertainties in Climate Change to Support Analysis of Risk and of Options”, Geneva: Intergovernmental Panel on Climate Change IPCC 2004.
  • [4] Hulme, M. "Why we disagree: understanding controversy, inaction and opportunity", Cambridge: Cambridge University Press 2009.
  • [5] Painter, J. "Poles Apart: The international reporting of climate scepticism", University of Oxford, UK: Reuters Institute for the Study of Journalism 2011.
  • [6] Aven, T., Renn, O. "An Evaluation of the Treatment of Risk and Uncertaintiesin the IPCC Reports on Climate Change", Risk Analysis 2015: 701-712.
  • [7] APSC. "Tackling wicked problems: a public policy perspective", 2016: August 31. http://www.apsc.gov.au/__data/assets/pdf_file/0005/6386/wickedproblems.pdf.
  • [8] Lawson, N. "The Trouble With Climate Change" London: The Global Warming Policy Foundation 2014.
  • [9] Forest, C. E. "Quantifying Uncertainties in Climate System Properties with the Use of Recent Climate Observations", Science 2002: January 4; 113-117.
  • [10] IEA, I. "Climate Policy Uncertainty", Paris: International Energy Agency 2007.
  • [11] Schneider, S. H., Kuntz-Duriseti, K. "Uncertainty and Climate Change Policy", Island press, Washington D.C., USA: In: Schneider SH, Rosencraz A, Nile JO (eds) climate change, 2002.
  • [12] Doshi, S. "The Oil and Gas Industry’s Dangerous Answer to Climate Change", 2021: August 25. https://americanprogress.org.
  • [13] EIA, U. 2021: October 5. https://www.eia.gov: https://www.eia.gov/energyexplained/natural-gas/factors-affecting-natural-gas-prices.pp
  • [14] Krauss, C., Eavis, P. "Energy Prices Spike as Producers Worry Over Pandemic and Climate", New York 2021. https://www.nytimes.com/2021/10/04/business/energy-environment/oil-and-gas-prices- clean-energy.html.
  • [15] Frankel, J. "High Oil Prices Can Help the Environment", Cambridge 2021: 11 25. https://www.project-syndicate.org/bigpicture/burning-energy .
  • [16] Keane, P. "How the oil industry made us doubt climate change", BBC News 2020: September 20. https://www.bbc.com/news/stories-53640382.
  • [17] Pattee, E. "The scientists hired by big oil who predicted the climate crisis long ago", The Guardian 2021: July 2. https://www.theguardian.com/environment/2021/jul/02/scientists-climate-crisis- big-oil-climate-crimes.
  • [18] Dunn, J. P. "Despite oil industry howling, companies are awash in public lands drilling permits", WestWise 2021: August 2021. https://medium.com/westwise.
  • [19] COP26. COP26 Explanied: Glasgow 2021: https://ukcop26.org/cop26-goals/.
  • [20] Gavriilidis, K. "Measuring Climate Policy Uncertainty", SSRN 2021. https://ssrn.com/abstract=3847388., 1-9.
  • [21] EPU. "Economic Policy Uncertainty", 2021: November 25. https://www.policyuncertainty.com/EMV_monthly.html.
  • [22] Duva, N. "7 industries at greatest risk from climate change", CNBC.Com 2014: October 22. https://www.cnbc.com/2014/10/22/7-industries-at-greatest-risk-from-climate-change.html.
  • [23] Åberg, A., Benton, T. G., Froggatt, A. COP26: "What happened, What does this dean, What happens next?" London: Chatham House 2021.
  • [24] Perkins, R. "Global fossil fuel demand set for 2025 peak under net-zero pledges", IEA 2021: October 13. https://www.spglobal.com: https://www.spglobal.com/
  • [25] Levy , D. L., Kolk, A. "Strategic Responses to Global Climate Change: Conflicting Pressures on Multinationals in the Oil Industry", Business and Politics 2002: 275-300.
  • [26] Rozenberg, J., Hallegatte , S., Vogt-Schilb, A., Sassi , O., Guivarc, C., Waisman, H., et al. "Climate policies as a hedge against the uncertainty on future oil supply", The journal of Climatic Change 2010.
  • [27] Maisonnave, H., Pycroft, J., Saveyn, B., Ciscar, J.-C. "Does climate policy make the EU economy more resilient to oil price rises?", The Journal of Energy Policy 2012: 172-179.
  • [28] Fertel, C., Bahn, O., Vaillancourt, K., Waaub, J.-P. "Canadian energy and climate policies: A SWOT analysis in search of federal/provincial coherence", Journal of Energy Policy 2013: 1139-1150.
  • [29] Liu, M.-L., Ji, Q., Fan, Y. "How does oil market uncertainty interact with other markets? An empirical analysis of implied volatility index", The International Journal of Energy 2013: 860-868.
  • [30] Klevnäs, P., Stern, N., Frejova, J. "Oil Prices and the New Climate Economy", 2015. http://newclimateeconomy.report.
  • [31] Paterson, R., Kumar, L., Taylor, S., Lima, N. "Future climate effects on suitability for growth of oil palms in Malaysia and Indonesia", Scientific Reports 2015:5 ; 1-11.
  • [32] Bauer, N., Mouratiadou , I., Luderer , G., Baumstark, L., Brecha , R. J., Edenhofer , O., et al. "Global fossil energy markets and climate change mitigation – an analysis with REMIND", Climate Change 2016: 69–82.
  • [33] Aloui, R., Gubta, R., Millier, S. M. "Uncertainty and Crude Oil Returns", Journal of Energy Economics 2016: 92-100.
  • [34] Fæhn, T., Hagem, C., Lindholt, L., Mæland, S., & Rosendahl, K. E. "Climate Policies in a Fossil Fuel Producing Country: Demand versus Supply Side Policies", The Journal of Energy 2017: 38; 77-102.
  • [35] Erickson, P., Lazarus, M., Piggot, G. "Limiting fossil fuel production as the next big step in climate policy", The Journal of Nature Climate Change 2018: 8; 1037-1043.
  • [36] Zou, X. "VECM Model Analysis of Carbon Emissions, GDP, and International Crude Oil Prices", The Journal of Hindawi, Discrete Dynamics in Nature and Society 2018: 2-11.
  • [37] Mercure, J. -F., Pollitt , H., Viñu, J. E., Viñuales, J. E., Edwards, N. R., Holden, P. B., et al. "Macroeconomic impact of stranded fossil fuel assets", The Journal of New Climate Change 2018: 8; 588–593.
  • [38] Holden, E. "How the oil industry has spent billions to control the climate change conversation", Washington 2020. https://www.theguardian.com.
  • [39] Worland, J. "The Reason Fossil Fuel Companies Are Finally Reckoning With Climate Change", 2020. https://time.com.
  • [40] Abumunshar, M., Aga, M., & Samour, A. "Oil Price, Energy Consumption, and CO2 Emissions in Turkey. New Evidence from a Bootstrap ARDL Test", The Journal of Energies 2020: 2-15.
  • [41] Maghyereh, A., Abdoh, H. "Asymmetric effects of oil price uncertainty on corporate investment", The Journal of Energy Economics 2020: 2-18.
  • [42] Demir, C. "Macroeconomic Determinants of Stock Market Fluctuations: The Case of BIST-100", Journal of Economies 2019: 8-9.
  • [43] Nam, K. "Investigating the effect of climate uncertainty on global commodity markets", The Journal of Energy Economics 2021: 2-14.
  • [44] Fried, S., Novan, K., Peterman, W. B. "The Macro Effects of Climate Policy Uncertainty", Federal Reserve Bank of San Francisco 2021: 1-48.
  • [45] Wei, P., Li, Y., Ren, X., & Duan, K. "Crude oil price uncertainty and corporate carbon emissions", Environ Sci Pollut Res 2021. https://doi.org/10.1007/s11356-021-15837-8.
  • [46] COP26. COP26 Explanied. Glasgow 2021. https://ukcop26.org/cop26-goals/.
  • [47] White House. Briefing Room 2021: November 23. https://www.whitehouse.gov/briefing-room/statements-releases/2021/11/23/president-biden-announces-release-from-the-strategic- petroleum-reserve-as-part-of-ongoing-efforts-to-lower-prices-and-address-lack-of-supply-around-the-world/
  • [48] WHO. "World Health Organization", 2021: November 28. https://www.who.int/news/item/28-11-2021-update-on-omicron.
  • [49] Lawler, A. Commodities 2021: November 29. https://www.reuters.com/markets/commodities/oil-recoups-losses-friday-focusing-omicron-spread-iran-talks-2021-11-29/ adresinden alınmıştır.
  • [50] McGreal, C. The Guardian 2021: 19 July. https://www.theguardian.com/environment/2021/jul/19/big-oil-climate-crisis-lobby-group-api.
  • [51] Xu, B., Fu , R., Lau, C. K. "Energy Market Uncertainty and the Impact on the Crude Oil Prices", Journal of Environmental Management 2021:1-32.
  • [52] Doshi, S. "The Oil and Gas Industry’s Dangerous Answer to Climate Change", 2021: August 25. https://americanprogress.org.
  • [53] Sommer, J. "Big Oil Takes a Beating, but Its Investors Are Riding High", New York 2021. https://www.nytimes.com.
  • [54] Eviews. 2021. http://www.eviews.com/home.html: http://www.eviews.com/home.html
  • [55] Dickey, D. A., Fuller, W. A. "Distribution of the Estimators for Autoregressive Time Series With a Unit Root", Journal of the American Statistical Association 1979: 427-431.
  • [56] Granger, C. E. "Co-Integration and Error Correction: Representation, Estimation, and Testing", The Econometric Society 1987: 251-276.
  • [57] Koop, G., Pesaran, M., Potter, S. M. "Impulse response analysis in nonlinear multivariate models", Journal of Econometrics, 1996: 74; 119-147.
There are 57 citations in total.

Details

Primary Language English
Subjects Environmentally Sustainable Engineering, Energy Systems Engineering (Other), Petroleum Engineering
Journal Section Research Article
Authors

Mustafa Hamad Ameen 0000-0001-7797-5779

Aslı Afşar 0000-0001-7031-1419

Project Number Non
Publication Date June 27, 2022
Submission Date January 5, 2022
Acceptance Date May 22, 2022
Published in Issue Year 2022 Volume: 7 Issue: 1

Cite

APA Hamad Ameen, M., & Afşar, A. (2022). Investigating the effects of climate policy uncertainty on the US petroleum markets. International Journal of Energy Studies, 7(1), 1-20.
AMA Hamad Ameen M, Afşar A. Investigating the effects of climate policy uncertainty on the US petroleum markets. Int J Energy Studies. June 2022;7(1):1-20.
Chicago Hamad Ameen, Mustafa, and Aslı Afşar. “Investigating the Effects of Climate Policy Uncertainty on the US Petroleum Markets”. International Journal of Energy Studies 7, no. 1 (June 2022): 1-20.
EndNote Hamad Ameen M, Afşar A (June 1, 2022) Investigating the effects of climate policy uncertainty on the US petroleum markets. International Journal of Energy Studies 7 1 1–20.
IEEE M. Hamad Ameen and A. Afşar, “Investigating the effects of climate policy uncertainty on the US petroleum markets”, Int J Energy Studies, vol. 7, no. 1, pp. 1–20, 2022.
ISNAD Hamad Ameen, Mustafa - Afşar, Aslı. “Investigating the Effects of Climate Policy Uncertainty on the US Petroleum Markets”. International Journal of Energy Studies 7/1 (June 2022), 1-20.
JAMA Hamad Ameen M, Afşar A. Investigating the effects of climate policy uncertainty on the US petroleum markets. Int J Energy Studies. 2022;7:1–20.
MLA Hamad Ameen, Mustafa and Aslı Afşar. “Investigating the Effects of Climate Policy Uncertainty on the US Petroleum Markets”. International Journal of Energy Studies, vol. 7, no. 1, 2022, pp. 1-20.
Vancouver Hamad Ameen M, Afşar A. Investigating the effects of climate policy uncertainty on the US petroleum markets. Int J Energy Studies. 2022;7(1):1-20.