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Oil vulnerability index dg2 20110917
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Oil vulnerability index dg2 20110917

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  • This paper assesses the relative oil vulnerability of 26 net oil importing countries for the 2004. Oil vulerability index (OVI) – 오일취약성지수 is calculated by using (3) supply risk indicator and (4) market risk indicators Higher OVI means higher vulnerability ( 점수가 높을 수록 취약하다 ). The results show that there are considerable differences in the value of individual indicators and Oil vulnerability index among the countries At the end of this paper, there are some policy suggestion to improve Oil vulnerability index in different condition
  • 산유국이 1. 중동지역이다 . 2. choke point ( 요충지 ) 기름의 운송은 수에즈 운하나 , 호르무즈 해협을 지나며 이 길목은 테러의 위협이 있다 . 3. 오일의 생산량의 peak 를 넘겼다 . ( 미국 1971, 멕시코 2002, opec 만 남아있다 . )
  • -. 3 major risk : 1) market risk : macroeconomic effects due to erratic price fluctuation 2) supply risk : physical disruption in oil supplies 3) environmental risk : climate change, global warming, accidents, polluting emission
  • 3 supply risk indicator 1) DoR/DoC ( domestic oil reserve / total oil comsumption) 2) GOR ( geopolitical oil risk) ( 산유국의 전쟁이나 , 정치적 문제로 인해 공급에 영향을 받는 경제의 노출 ) -> 높을수록 노출이 많이 됨 (1) net oil import dependence of an oil importing country (2) diversification of oil imports (3) political risks in oil supplying countries  3 개를 묶어서 GOMCR 지수로 나타냄 (4) market liquidity  ML 4 market risk indicator 1) GDP/POP ( GDP/ capita at market exchange rate) 2) OI (oil intensity at market exchanger rate) = oil consumed in a economy /GDP 3) VOM/GDP (cost of oil in national income) = value of oil imports / GDP 4) OS (Oil share) = oil consumption / total primary energy consumption
  • OVI : oil vulnerability index
  • I make summary table like this. For example GOMCR which means diversity of import. The arrow mean as higher value indicate more vulnerable
  • OVI : oil vulnerability index
  • OVI : oil vulnerability index Quadrant 1  market, supply risk low area 1) supply risk : low GOMCR  well diversified sources of oil supply (ex US imports oil from almost all producing region) Austrailia and US have own oil production 2) market risk : all these are economically developed Oil efficient countries  very high paying capacity and very low cost of oil in income
  • > Reduce supply risk 1. Very short run : physical control such as banning the use of car during some period and cutting wastage through education 2. Short to medium term : diversification of oil supply source is a more feasible option 3. Medium to long term : reduction in overall oil dependence through improving oil efficiency 4. Long run term : diversifying energy choices by increasing use of alternative fuels (wind, wave, biofuel) Reduce market risk Short run : coordinated use of strategic oil stocks is one of the most important means Developed nations should invest heavily in the research and development of advanced energy technologies such as hydrogen and carbon sequestration  reduce growth oil consumption and environmental impact of energy production and use Expansion in cross – border trade in all energy types such as natural gas and unclear energy  diversifying energy mix away from oil Global oil security requires sustanable international investments in oil development in oil producing countries
  • Transcript

    • 1. Oil vulnerability index of oil-importing countries Eshita Gupta (2007) DG2 Team
    • 2. 1. Introduction
      • Oil – 35% of the global energy demand
      • 60% of the global oil supply internationally trade in 2005
      • North America, Asia-pacific, Europe – 10% reserve, 78.6% demand
      • Middle East, Soviet Union, Africa - 81.3% reserve, 15.5% demand (2005)
      • * 75.2 % of oil reserve, 41.7% of oil production  OPEC (Political risk high Area)
      • Over two third of Oil is transferred by sea through “chokepoint” (Suez canal)
      •  shipping accidents, terrorist attacks
      • Peak oil factor _ Non OPEC already peak production (USA 1971, Mexico 2002)
      • Objective of this paper is to quantify and assess the relative oil vulnerability of 26 net oil
      • importing countries for the year 2004 on the basis of four market risk indicator and three
      • supply risk indicators
    • 3. 2. Literature review on oil vulnerability and its indicators
      • Notion of oil vulnerability
      •  Oil consuming countries vulnerable to international developments such as higher oil
      • prices and oil supply disruptions
      •  3 major risk which contribute to the overall oil vulnerability of an economy
      • 1) market risk : macroeconomic effects due to erratic price fluctuation
      • 2) supply risk : physical disruption in oil supplies
      • 3) environmental risk : climate change, global warming, accidents, polluting emission
    • 4. 3. Indicator and sources
      • Three supply risk indicators
      • 1) DR/DC ( domestic oil reserve / total oil consumption)
      • 2) GOR ( geopolitical oil risk)
      • (1) net oil import dependence of an oil importing country
      • (2) diversification of oil imports GOMCR
      • (3) political risks in oil supplying countries
      • (4) market liquidity  ML
      • Four market risk indicators
      • 1) GDP/POP ( GDP/ capita at market exchange rate)
      • 2) OI (oil intensity at market exchanger rate) = oil consumed in a economy /GDP
      • 3) VOM/GDP (cost of oil in national income) = value of oil imports / GDP
      • 4) OS (Oil share) = oil consumption / total primary energy consumption
    • 5. 4. Empirical results (discussing OVI)
      • The rank of 1  most vulnerable country
      • Average ( 26 countries) = 0.64
      • 4 homogeneous Grouping
      • Asia > Europe , US
      • Philippines, Korea , and India  Most vulnerable
    • 6. 4. Empirical results (individual indicator) Supply risk ( 3 indicators) DR/DC ML GOMCR   (Reserve/consumpton) (Market liquidity) (Diversity of import)   ↓ ↓ ↑ Vulnerable Market risk (4 indicators) OI (Oil intensity) GDP/POP VOM/GDP OS(Oil share)   (Oil consumed /GDP) (GDP per captia) (Oil import/GDP) (Oil /Total energy)   ↑ ↓ ↑ ↑ Vulnerable
    • 7. 4. Empirical results (individual indicator) Supply risk ( 3 indicators) DR/DC ML GOMCR   (Reserve/consumpton) (Market liquidity) (Diversity of import)   ↓ ↓ ↑ Vulnerable Market risk (4 indicators) OI (Oil intensity) GDP/POP VOM/GDP OS(Oil share)   (Oil consumed /GDP) (GDP per captia) (Oil import/GDP) (Oil /Total energy)   ↑ ↓ ↑ ↑ Vulnerable
    • 8. 4. Empirical results (contribution of indicator in OVI)
      • There are significant difference among counties with regard to the respective contribution of these indicators
      • Quadrant 1  Best scenario (below average vulnerability)
      • Quadrant 3  Worst scenario (over average vulnerability)
    • 9. 5. Policy implications for sustainable development
      • On an average, market risk indicators turn out to be more significant than the supply
      • risk in determining the overall oil vulnerability of the selected countries
      •  Policies aimed at improving market risk ( internal factor : Oil intensity, Paying capacity)
      •  Focus on the oil conservation and substitution policies ( reducing import demand,
      • improving oil efficiency)
      • The most developed countries  Supply risk is relatively higher than the market risk
      • The less developed countries  Market risk is relatively higher than the supply risk
      Policy tool Goal Method #1 Reduce overall oil supply risk & Oil import demand
      • Restraining demand
      • Increasing investment in exploration and production
      • Diversifying supply source and fuel choice
      #2 Reduce market risk & overall macroeconomic vulnerability
      • Increasing strategic petroleum reserves
      • Building foreign exchange reserves
      • Promoting exports to oil producing countries

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