Oil Threshold Value between Oil Price and Production

  • Tzu-Yi Yang Ming Chi University of Technology, Department of Business and Management, Taiwan
  • Thieu Thi Thanh Ha Ming Chi University of Technology, Department of Business and Management, Taiwan
  • Chia-Wei Yen Formosa Petrochemical Corporation, Oil and Gas E&P Department, Taiwan

Abstract

This study proposes a panel smooth transition regression (PSTR) model to investigate the nonlinear relationship between crude oil prices and crude oil production in 122 countries, both OPEC and non-OPEC, from March 1994 to October 2015. The statistical test for the existence of a threshold effect indicates that the relationship between oil prices and oil production is nonlinear, with different changes over time among the oil price and transition variables. Additionally, a threshold value exists. Furthermore, crude oil price volatility exhibits asymmetric responses to production volatility by fluctuating above or below the threshold value. Finally, when crude oil price volatility with a lag of two periods exceeds the threshold value, crude oil production changes have a positive impact on crude oil price volatility. In contrast, when crude oil price volatility with a lag of two periods is less than the threshold value, crude oil production changes have a negative impact on price volatility.


Key words: Panel smooth transition regression (PSTR) model, Threshold effects, Crude oil prices, Crude oil production, Nonlinear relationship.

How to Cite
Yang T., Thanh Ha T., & Yen C. (2018). Oil Threshold Value between Oil Price and Production. Panoeconomicus, Advance online publication. doi:10.2298/PAN161013009Y
Section
Original scientific paper