Energy Economics
Hamidreza Panah; Seyed Nematollah Mousavi; Bahaaldin Najafi
Abstract
Oil has a large share of the world's total energy consumption. For this reason, it is obvious that any fluctuations in demand, supply, price and other variables affecting this sector have many effects on the economy of oil producing and consuming countries. Any factor that causes a disruption in the ...
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Oil has a large share of the world's total energy consumption. For this reason, it is obvious that any fluctuations in demand, supply, price and other variables affecting this sector have many effects on the economy of oil producing and consuming countries. Any factor that causes a disruption in the supply or demand of oil and the subsequent market will in most cases lead to a change (decrease or increase) in the price. These price changes have had effects on the behavior of energy producers and consumers due to the price determining factor on both supply and demand sides of the energy market. This study examines the inter-variable time-varying conditional correlation between the world oil price and the return of industrial production index (real GDP) in oil exporting countries (Iran, Saudi Arabia, UAE) and OECD countries. Therefore, in this study, using the monthly data of world oil prices, the efficiency of the industrial production index of the Middle East and OECD countries from 2000-2021, and using the Oxmetrics software, the time-varying conditional correlation of the global oil price and the efficiency of the production index Industry in selected countries has been analyzed by CDCC-GARCH method. The results showed that the time-varying conditional correlation with the global oil price and GDP is real and the changes in the final oil price have caused significant changes in the dynamic correlation between the variables in the form of uncertainty.
Energy Economics
Heshmatullah Asgari; Ali Moridian
Abstract
Iran's economy has consistently experienced a rise in the budget deficit (BD), which has hindered the country's capacity to see overall economic growth. However, it also constantly deals with uncertainty in the international market. Careful management of the link between these two forms of deficits is ...
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Iran's economy has consistently experienced a rise in the budget deficit (BD), which has hindered the country's capacity to see overall economic growth. However, it also constantly deals with uncertainty in the international market. Careful management of the link between these two forms of deficits is necessary to attain stability and sustainable economic growth. This research has investigated the Dynamic causal relationship between double Current Account Deficits (CAD) and Iran's budget deficit (BD) from 1965 to 2018 using the rolling window (bootstrap) method. Every era of causality is examined, taking into account the structural gaps. The paper's findings support the Mundell-Fleming model by demonstrating that, between 1981 and 1987, the budget deficit (BD) positively impacted the current account deficit. However, between 1975 and 1977, 1998 and 1999, and 2005 and 2013, the country's lack of organized or poorly organized financial markets resulted in the abandonment of the current account deficit, which had a detrimental effect on the country's budget deficit (BD). Furthermore, the findings indicate that the government's budget deficit (BD) was positively and significantly impacted by the Current Account Deficit (CAD) from 1991 to 1992, but negatively and significantly impacted from 1975 to 1976, 1981 to 1985, 1989 to 1970, 2005 to 2006, and 2009 to 2011. Overall, the findings suggest that there is dynamic causation between the twin budget-current account deficits, albeit in distinct directions. This suggests that the Iranian government is unable to address the imbalance in its external sector through budget policy.
Energy Economics
Seyyed Mohammad Reza Aghaei Marzebali; Abdollah Arasteh
Abstract
Many nations’ quick development and progress during the last century may be directly attributed to the widespread use of fossil fuels. Particularly, oil has stood out as a defining feature of human civilization. However, the increasing use of fossil fuels like oil and coal has led to serious problems ...
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Many nations’ quick development and progress during the last century may be directly attributed to the widespread use of fossil fuels. Particularly, oil has stood out as a defining feature of human civilization. However, the increasing use of fossil fuels like oil and coal has led to serious problems for the world’s ecosystems, national security, and economic prosperity. This article uses actual options to determine the best time to invest in renewable energy based on diesel price volatility, electricity price volatility, and oil consumption externalities. Different actual choice approaches for discretion assessment are addressed and compared, as well as the usage of devolution for decision making. Finally, Monte Carlo simulations are used to compare these techniques to conventional approaches. The findings show that investments in renewable energy have a positive net present value. The timelessness of investing choices is emphasized by the real options method. Under the present energy system in Iran, switching to renewable energy sources is preferable than maintaining reliance on oil to provide power. Switching to renewable energy sources can help Iran reduce its reliance on oil and promote sustainable economic growth. Furthermore, can help to address the negative externalities associated with fossil fuel use, such as air pollution and climate change. Therefore, it is essential to continue to evaluate and promote the development of renewable energy sources in Iran and around the world. By increasing the cost of using oil or reducing the cost of electricity, policies should encourage investment in renewable energy sources.
Energy Economics
Mina Javadinia; seyyed Abdol Majid Jalaee Esfand Abadi; Mehdi Nejati
Abstract
Today, the energy market in the world is facing an important position, and on the other hand, the importance of gas as a clean fuel is significant. According to the approach and structure of the energy market, the main axis of this research is based on the game theory approach. On the other hand, the ...
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Today, the energy market in the world is facing an important position, and on the other hand, the importance of gas as a clean fuel is significant. According to the approach and structure of the energy market, the main axis of this research is based on the game theory approach. On the other hand, the interests of Iran and Qatar will give rise to a conflict over price between the two countries. Therefore, in the present study the dynamic computable general equilibrium model and the 2014 social accounting matrix were used to investigate the impact of gas price shocks on the gas exports of these two countries. As Iran and Qatar are known as main competitors in the natural gas sector of world energy market, it is necessary to specify a win-win pricing strategy for both countries. Taking this into account, in the present study a model that incorporates both the dynamic computable general equilibrium and game theory is used for investigation purposes. The results indicate that, 0.5% price increase would be the best strategy from among the wide range of gas price scenarios presented for 2022-2024, because a 0.5% increase in gas prices in general would further increase the exports of Iran and Qatar as two competitors. Thus, based on the equilibrium forms, stepwise price rise over a specific time interval can help these two countries maximize their interests.
Energy Economics
Fatemeh Rafiei
Abstract
Energy subsidies have significant economic implications. On the one hand, they have protected consumers, but on the other hand, they have increased the budget deficit and public spending recently. Moreover, they have reduced private investment, especially in the energy sector, another dangerous consequence ...
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Energy subsidies have significant economic implications. On the one hand, they have protected consumers, but on the other hand, they have increased the budget deficit and public spending recently. Moreover, they have reduced private investment, especially in the energy sector, another dangerous consequence of energy subsidies. It is one of the key and controversial debates in the energy sector of the Iranian economy. The present paper is aimed at promoting thinking and research on how to eliminate energy subsidies. One idea is that energy subsidies should be reduced all at once, while others suggest a gradual elimination of energy subsidies. This paper simulates the elimination of energy subsidies in the base metals industry as one of the most energy-intensive industries in Iran. A dynamic recursive computable general equilibrium model is estimated to evaluate the economic impacts of removing gas subsidies in basic metal manufacture in Iran. according to the results, gas consumption will decrease, and electricity and petroleum products will increase in both scenarios (gradual increase in gas prices after 5 years as Scenario 1 and an increase in gas prices at once as Scenario 2). However, during the period, Scenario 2 reduces the supply of basic metals more than Scenario 1.
Energy Economics
Elham Gholampour; Teymour Mohammadi; Asghar Abolhasani hastiani; Mohsen Mehrara
Abstract
This paper primarily focuses on the global macroeconomic consequence, which are the result of country-specific oil supply shocks using the GVAR-Oil model estimated for 27 countries/regions over the 1979Q2-2019Q4 period. Not only does this approach include how shocks affect directly exposed countries ...
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This paper primarily focuses on the global macroeconomic consequence, which are the result of country-specific oil supply shocks using the GVAR-Oil model estimated for 27 countries/regions over the 1979Q2-2019Q4 period. Not only does this approach include how shocks affect directly exposed countries but it also indicates the indirect results of shocks thanks to secondary or tertiary channels. Given the importance of Saudi Arabia and Iran in the world’s oil supply, adopting this model facilitates the way in which oil supply shocks are examined in the country-specific context. Therefore, the results indicate different disruptions depending on which country is subject to the shock. In fact, this study shows that a negative shock to oil supply in Iran has relatively insignificant effects on the global economy compared with those of Saudi Arabia since it can be neutralized by the increase in Saudi Arabia oil production. A negative shock to the oil supply in Saudi Arabia, however, results in an increase in oil prices, which adversely affects GDP and financial market in general. In addition, this approach provides policymakers with more opportunities to cope with consequences, which are the result of Covid-19, sanctions, and war, for instance, in a wider range of countries as representatives of the global economy, and thus help them to make better strategic decisions.
Energy Economics
Ebrahim Hadian; Ali Hossein Ostadzad
Abstract
The pertinent question is whether scarcity of non-renewable energy resources limits economic growth. Given that the earth's natural resources are limited, the answer appears to be yes. However, there are two reasons to reject this question. Technological advancements that conserved resources may be able ...
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The pertinent question is whether scarcity of non-renewable energy resources limits economic growth. Given that the earth's natural resources are limited, the answer appears to be yes. However, there are two reasons to reject this question. Technological advancements that conserved resources may be able to eliminate resource scarcity. Additionally, countries can import resources from other countries. This paper aims to develop an endogenous growth model with stochastic exhaustible energy resources and use it to explain the economy's steady state behavior. We consider the uncertainty associated with extractable energy resources and then develop a stochastic growth model on this basis.Additionally, we solve this model analytically using the Stochastic Hamilton-Jacobin-Bellman method (SHJB method). Finally, for the Iranian economy, we apply the analytical solution. The primary findings indicate that as natural resource extraction becomes even more uncertain, the rate of economic growth slows, which results in a subsequent decline in the rate of resource extraction. Furthermore, we observe that the variance in energy extraction in the Iranian economy is approximately 0.22. Under these conditions of uncertainty, the optimal economic growth rate in a steady state will be 7.1 percent with an extraction rate of 1.1 percent.
Energy Economics
Mohammad Sayadi
Abstract
Given the 95% share of electricity generation from non-renewable energies, implementing effective policies to motivate electricity generation from sustainable energy resources is essential. Since the current Feed-in Tariff (FiT) policy increases the government’s expenditures to support renewable ...
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Given the 95% share of electricity generation from non-renewable energies, implementing effective policies to motivate electricity generation from sustainable energy resources is essential. Since the current Feed-in Tariff (FiT) policy increases the government’s expenditures to support renewable energies, a real options (RO) model is proposed to estimate solar power generation incentive subsidy. Moreover, establishing a carbon emission trading (CET) scheme under uncertainty is proposed, and sensitivity analysis is conducted for the project value, threshold value, and subsidy. Our results show that establishing a CET market could significantly reduce the economic costs of achieving renewable energy promotion goals. Based on the net present value (NPV) and RO criteria, in the case “with the possibility of CET,” the amount of incentive subsidy that should be paid to electricity generation from a solar project (case of a 5 kW plant) are 37.49 and 42.42 million Rials/kW, indicating 20% and 12% reduction compared to the base case (without the possibility of CET), respectively. The results also indicate that more electricity price volatility can increase the incentive subsidy while enhancing the market price of electricity can slightly decrease the required subsidy, which triggers solar investment.
Energy Economics
Hossein Amiri; Mohammad Hossein Karim; Fariba Asadi
Abstract
Despite the high potential of geothermal reservoirs in Meshkinshahr, we only see the government entering the electricity extraction of geothermal energy because the cost of the Meshkinshahr geothermal electricity is higher than the balanced price of the electricity market and the private sector is disadvantaged ...
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Despite the high potential of geothermal reservoirs in Meshkinshahr, we only see the government entering the electricity extraction of geothermal energy because the cost of the Meshkinshahr geothermal electricity is higher than the balanced price of the electricity market and the private sector is disadvantaged for entering it. So, the government has adopted a feed in tariff policy for geothermal electricity to encourage private sector investors. This research is aimed at financial appraisal of Maskinshahr geothermal power plant with the assumption of feed in tariff by the government with Equivalent Uniform Annual Worth, Equivalent Uniform Annual Worth, and Equivalent Uniform Annual Cost methods. Equivalent Uniform Annual Benefit is obtained from feed in tariff of government and Equivalent Uniform Annual Cost is determined based on technical and economic components of the geothermal power plant and macroeconomic parameters. The results of the data analysis show that the construction of the geothermal power plant is fully justified with the 14% reduction rate, but if the investor's minimum expected rate exceeds 54%, the construction of the power plant has no economic justification. Also, if the construction of Meshkinshahr geothermal plant takes more than 13 years and 5 months like the government project, the generation of geothermal power is not cost-effective.
Energy Economics
Mojtaba Pourghorban; Siab Mamipour
Abstract
The restructuring of Iranian electricity industry allowed electricity price to be determined through market forces in 2005. The main purpose of this paper is to present a method for modeling and forecasting the electricity prices based on complex features such as instability, nonlinear conditions, and ...
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The restructuring of Iranian electricity industry allowed electricity price to be determined through market forces in 2005. The main purpose of this paper is to present a method for modeling and forecasting the electricity prices based on complex features such as instability, nonlinear conditions, and high fluctuations in Iran during the spring 2013 and winter 2018. For this purpose, time-series data of the daily average electricity price was decomposed into one approximation series (low frequency) and four details series (high frequency) utilizing the wavelet transform technique. The approximation and details series are estimated and predicted by ARIMA and GARCH models, respectively. Then, the electricity price is predicted by reconstructing and composing the forecasted values of different frequencies as a proposed method (Wavelet-ARMA-GARCH). The results demonstrated that the proposed method has higher predictive power and can forecast volatility of electricity prices more accurately by taking into consideration different domains of the time-frequency; although, more errors are produced if the wavelet transform process is not used. The mean absolute percentage error values of the proposed method during spring 2017 to winter 2018 are significantly less than that of the alternative method, and the proposed method can better and more accurately capture the complex features of electricity prices.
