Balancing Energy Security Priorities: Portfolio Optimization Approach to Oil Imports

  • Focus Area -
  • Type KAPSARC journal article
  • Date 9 September 2020
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Abstract

The notion of energy security in most interpretations includes the physical supply and price affordability components, making financial risks a crucial part of energy security strategies. Mainstream analysis has focussed on the notion of the physical supply. This paper introduces a novel approach, considering simultaneously the quantity of oil imports and the risk associated with this quantity. This approach applies the financial portfolio theory to explore these issues from the perspective of four major Asian energy importers: China, Japan, Korea and Taiwan, by estimating efficient frontiers for corresponding oil import portfolios. Results show that the composition of oil import portfolios determines varying risk levels for given oil import growth rates and average import prices. Scenario analysis suggests that increasing the Saudi Arabia share of oil imports improves the portfolio performance of China and that the impact of the Iranian oil export embargo would increase portfolio risk of the economies in focus within a 3–15% range.

https://doi.org/10.1080/00036846.2020.1808573

Taylor & Francis Online

Authors

Philipp Galkin

Philipp Galkin

Visiting Researcher Philipp is a visiting researcher at KAPSARC, working on the economic and policy aspects of energy supply and trade. Philipp’s… Philipp is a visiting researcher at KAPSARC, working on the economic and policy aspects of energy supply and trade. Philipp’s work at KAPSARC includes evaluating the effect of preferential trade agreements on energy flows, analysis of OPEC energy policy and deriving insights related to China’s energy policy and its impact on global markets through modeling energy supply sectors.

Expertise

  • International economic relations
  • Regional and country studies and policy analysis

Publications See all Philipp Galkin’s publications

Simona Bigerna

Simona Bigerna

Associate Professor of Economics, University of Perugia

Carlo Andrea Bollino

Carlo Andrea Bollino

Visiting Researcher Carlo Andrea Bollino is a Professor of Economics at the University of Perugia and Professor of Energy Economics at the… Carlo Andrea Bollino is a Professor of Economics at the University of Perugia and Professor of Energy Economics at the University LUISS, Rome. He holds a Ph.D. in Economics from the University of Pennsylvania, where he was supervised by Nobel laureate Professor Lawrence Klein. He has been a Visiting Researcher at KAPSARC since 2015, focusing on econometric analysis, electricity market reform and climate change policy analysis. He is a Visiting Professor at Technische Universität, Berlin, Germany, the President (honorary) of the Italian Association for Energy Economics. He was the President of the IAEE in 2008, the President of GSE (Italian Renewable Energy Agency) and GRTN (Italian Electric Transmission network); Energy Advisor to the Minister of Industry and Ministry of Treasury of Italy; Chief Economist, ENI; Economist, Bank of Italy; and a Research Associate at Project Link for the United Nations. He has testified to the Italian Senate and Parliament briefings and has provided various governments with technical and policy reports on electricity market liberalization and renewable energy developments.

Expertise

  • Consumer Behavior
  • Investment
  • Energy and Environment
  • Macroeoconometric Modeling

Publications See all Carlo Andrea Bollino’s publications

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