The King Abdullah Petroleum Studies and Research Center (KAPSARC) has developed an analytical framework for shocks to world oil markets. This framework helps to facilitate research on the impacts of countries’ oil shocks on gross domestic product (GDP), inflation, interest rates, and inventories, in addition to exchange rates and equity prices around the world.
According to the study conducted by the researchers Jennifer Considine, Abdullah Aldayel and Emre Hatipoglu, the new framework “Global Vector Autoregression Oil and Inventory Model (GOVAR)” represents 36 countries, seven regions or sub-regions, and eight country-specific variables. The framework also uses quarterly data from 1979Q1 to 2018Q3 from a variety of sources, including the U.S. Energy Information Agency (EIA), World Bank, International Monetary Fund (IMF), and Bloomberg.
The study, viewed by Asharq Alawsat newspaper, showed that the new model includes 36 countries, collectively representing over 87% of the global GDP, and eight of the world’s top 15 oil exporting nations. The countries include 12 major oil producers that collectively account for 66% of global crude oil output, and hold approximately 65% of proven oil reserves. The list includes five of the world’s top six producers: Saudi Arabia, the U.S., Russia, Canada and China.
The paper noted the importance of establishing sovereign wealth funds in oil exporting countries that can absorb economic shocks, thereby dampening the response of the wider economy to system-wide disruptions, which made the persistence profiles (PP) 95% in countries like Saudi Arabia and Norway.
The new analytical framework divides the global industry into country- and region-specific models. It determines crude oil supplies and inventories in country-specific models conditional on world oil prices, which in turn estimates from aggregate global inventories, world oil supplies, and income.
KAPSARC has more than 1,300 ready-made versions of research models and modeled data, and over 50 million data records on a variety of topics, including energy, economics and environment issues locally and globally. The center provides free access to its tools and research models to contribute to a better understanding of energy economics and environmental policies.
It is noted that KAPSARC announced last February its progress in the list of the best research centers regionally and globally. KAPSARC jumped 14 ranks in the Middle East and North Africa (MENA) research centers to rank 15th among 103 research centers in the region, and ranked globally 13th out of 60 research centers specializing in energy policies and resources.