Influence of Selected Variables on the Price of Petroleum Products in the Republic of Croatia

Transcription

1 Economy Transdscplnarty Cognton Volume 6, Issue 2/ Influence of Selected Varables on the Prce of Petroleum Products n the Republc of Croata Ton MILUN, Marna HORVATOVIĆ, Ivona POSARIĆ Unversty of Splt, CROATIA tonmlun@gmal.com Abstract: In the last few years there have been great varatons n prces of crude ol n the world caused by several reasons: wars n the Mddle East, global economc crss, the Iranan nuclear ssue, workers' strkes on platforms, hurrcanes that threaten ol rgs, etc. Consequently, the prces of petroleum products have sgnfcantly changed manly ncreased. As people spend more on fuel, ther purchasng power and standard are beng reduced, resultng n weakenng of ther qualty of lfe. The formula for calculatng the prce of petroleum products of the ol company INA, majortyowned by the Republc of Croata, does not nclude the prce of crude ol - the basc raw materal for ts producton, but t ncludes the cost of petroleum products n the Medterranean market. Ths creates the possblty of manpulatng the prce of petroleum products n order to acheve extra profts of ol companes. Ths paper examnes a multple lnear regresson model that wll try to answer the queston as to what extent the trend of crude ol prces on the world market, wth USD to HRK exchange rate and VAT rate was statstcally sgnfcant n the prce of Eurosuper 95 n the Republc of Croata n the perod from January 2007 to February 203. Keywords: petroleum products, crude ol, fuel, fuel prces, the prce of petroleum products Introducton Crude ol (CO) s a major energy source, whch covers one thrd of the world's energy needs and has daly consumpton of approxmately 75 mllon barrels [, 652]. Snce ol takes the frst poston n the world's energy consumpton, ahead of all the other energy sources: natural gas, coal, nuclear energy, water power energy etc., changes of CO prce have got a huge mpact on the world economy [2, 8-2]. Whle hgh prce of CO on the world market ncreases nflaton and consequently weakens the economes of the mportng countres, low CO prce may cause a collapse of the exportng countres' economes. Government budget of Venezuela, Saud Araba, Mexco and some other countres are strongly lnked to CO prces [, 652]. Crude ol crss s a term for dsorders that occur n the perod of a consderable growth of the crude ol prce. There were two ol crss recorded durng the 970s and both of them caused strong recessons n ndustral countres. It s assumed that an ol crss s gong to occur when the demand for ol exceeds the supply. The frst crss started n autumn of 973 when the ol exportng countres, unted n the Organzaton of Petroleum Exportng Countres (OPEC), decreased on purpose ol producton by 5% n order to ncrease the ol prce. In only a few days the prce of CO ncreased by 70%, resultng n the prce ncrease from 3 USD per barrel to more than 5 USD. Durng the followng year the prce of CO on the world market ncreased to more than 2 USD. The second crss was recorded durng 979 and 980, and t was caused by the decrease n ol producton at the tme of the Iran Iraq war. In the 980s the ncreased prce of CO on the world market was a consequence of OPEC, but after 980 Internatonal Energy Agency (IEA), representng the mportng countres, took over a more domnant role n defnng the prce of CO. In the perod between 2004 and 2008, a huge growth and prce varablty of CO prces have been recorded. The petroleum product prces were also changng n accordance wth that. After reachng ts peak of 47 USD per barrel n July 2008, the prce of CO fell to less than 35 USD per barrel n December of the same year, and afterwards t vared mostly between 70 and 30 USD. Ths same 24

2 perod recorded also fluctuatons of the US dollar value up to 30%. Consderng that the ol prce was very changeable n that perod, there mght even be a talk of a new, thrd ol crss. As CO s a basc raw materal n the producton of petroleum products, t s to be expected that, apart from the USD/HRK exchange rate, t wll be the man parameter n determnaton of ther prce n the Republc of Croata. However, accordng to the Ol and Petroleum Products Market Act [3] and Law on Amendments to the Ol and Petroleum Products Market Act [4] the petroleum product prce does not nclude the crude ol prce, but the followng market elements: petroleum product prce on the Medterranean market; USD/HRK exchange rate; premum of the energy undertakngs; fnancal resources for The Croatan Compulsory Ol Stocks Agency (HANDA), the amount of whch s determned by the Government of Republc of Croata, upon proposal of The Croatan Compulsory Ol Stocks Agency (HANDA); fees and taxes calculated accordng to specfc regulatons [3], [4]. The prce of petroleum products s defned n accordance wth By-law on petroleum product prce formng proscrbed by the Mnstry of Economy. Formula to calculate the petroleum product prce: n CIF Med T C H max B P n 000 whereby: Cmax the hghest permtted prce expressed n kunas per ltre (HRK/l); CIF Med mdpont daly stock market prce of petroleum products n USD per ton (USD/t) publshed n Platt's European Marketscan ; T mdpont daly USD/HRK exchange rate posted by the Croatan Natonal Bank on the day for whch the mdpont daly stock market prce of petroleum products s posted; daly data for the perod snce the prevous prce change; n number of posted mdpont daly stock market prces of petroleum products ; ρ densty of the petroleum product (for Otto motor petrol ρ = kg/l); H the compensaton fee regardng the fnancng of HANDA (The Croatan Compulsory Ol Stocks Agency) n kn/t; B fee for bo-fuel producton ncentves n HRK/t; P premum of the energy undertakngs n HRK/l. The premum amount s defned at 0.76 HRK/l for petrol and desel fuels, except for gasolne statons on hghways and on the coast whch are permtted to form the premum amount themselves. Retal prces change every 4 days after mdnght on Monday to Tuesday, and the hghest permtted prce change s 3% [4]. Snce great fluctuatons n petroleum product prce were recorded n 2008, numerous meda n the Republc of Croata were very doubtful about the proper calculaton and they assumed that ol companes manpulate the prce n order to acheve hgher profts. In 2007 Brown and Vrman publshed the results of an econometrc model, whch explans that the 98% prce varaton n USD s a consequence of the prce change of CO. Ths ncrease n the prce of barrel of CO also caused an ncrease n spot gasolne prce by 2.8 cents [5], [2]. Ths paper s gong to estmate the nfluence of the CO prce change on EUROSUPER 95 petroleum product prce n the Republc of Croata. Smple lnear regresson model s gong to reply to the queston: How bg s the change of EUROSUPER 95 prce when the prce of a ltre of CO s ncreased by kn. Multple lnear regresson model s gong to establsh to whch extent CO prce, USD/HRK exchange rate and VAT rate nfluence the formng of prce of EUROSUPER 95 petroleum product. 25

3 . Data and Methodology The research ncludes data about the prce of EUROSUPER 95 petroleum product, the prce of CO and the VAT rate n the perod between January 2007 and February 203. The data on EUROSUPER 95 prce ranges have been collected at the Croatan autoclub webste. (HAK, Fuel prces) In the analyss we have used the data on prce ranges of CO type Brent, whch are relevant for the European market [6]. The VAT rate n the Republc of Croata changed twce wthn the montored perod: on August, 2009 t ncreased from 22% to 23%, and on March, 202 t ncreased by 2 more ponts, to 25%. In ths paper the relaton between varables has been explaned based on the two regresson models. The frst model s the smple lnear regresson model gven by: Y 0 X where Y s the response varable, the varable we wsh to explan or predct, X s the ndependent varable and s the error term. A multple regresson model was also conducted to examne the relatonshp n ths analyss. Ths model s appled n case that several ndependent varables affect one response varable. General multple regresson model of a response varable Y on a set of k ndependent varables X, X 2, X 3 s gven by: Y X X X k k Where 0 s ntercept of the regresson surface and, 26,2,..., k s the slope of the regresson 2 surface wth respect to varable X. The multple coeffcent of determnaton R measures the proporton of the varaton n the response varable that s explaned by the combnaton of the ndependent varables n a multple regresson model. A statstcal F-test wll be appled to tell us f there s a relatonshp between the response varable and at least one of the ndependent varables. Hypothess test s: H 0 : k H : Not all the (,2,..., k ) are zero. T-test s appled for each ndependent varable to tell us whether there s evdence that varable a lnear relatonshp wth Y. Hypothess test s: H 0 : 0 H: 0 [7, p ] X has 2. Results Dependency of response varable of the prce of petroleum product EUROSUPER 95 per ltre on the prce of barrel of CO n kuna s shown n Fgure. For the purpose of smple comparson, both varables are transformed nto the standard normal random varable Z ~ N (0. 2 ). x x Z-values for both varables are calculated based on expresson z, where x s the average varable value n the montored perod and s ts standard devaton value. Average and standard devaton values are gven n Table no.. Table no. Average and Standard Devaton values of EUROSUPER 95 and CO prce Varable Average Standard Devaton EUROSUPER 95 prce CO prce Source: authors calculatons

4 The assumpton that the prce of petroleum product EUROSUPER 95 follows up the prce change of crude ol has been graphcally presented. Fgure no.. Response of EUROSUPER 95 prce to CO prce Source: authors calculatons A lnear regresson model has been made n order to obtan quanttatve data. For the purpose of the model, the CO prce per ltre n kuna has been calculated, for the perod between January 2007 and February 203 and has been taken as an ndependent varable n the model. The prces have been calculated on the grounds of fact that the volume of barrel equals the volume of ltres. The dependant varable s the prce of EUROSUPER 95 petroleum product n HRK. The results of analyss conducted n programme package SPSS20 are as follows: Source of Varaton Regresson Table no. 2 ANOVA Table for Smple Lnear Regresson Degrees of Feedom DF Sum of Squares SS 24,06 Mean Square MS 24,06 F-rato p-value Error 24 0,780 Total 25 66,342 Source: authors calculatons 0,076 Based on Table no. 2 t can be concluded that the ndependent varable of CO prce per ltre s statstcally sgnfcant because of emprcal sgnfcance value p , whch s lower than Table no. 3 Regresson Results for Indvdual Parameters Coeffcent Varable Label Standard Error p-value Estmate Constant CO prce (HRK) X Source: authors calculatons 27

5 Based on the data from Table no. 3 t can be concluded that the ndependent varable and constant are statstcally sgnfcant and the equaton of smple lnear regresson model can be drawn up: Y (0.083).403 (0.027) X Parameter nterpretaton:.403 In the montored perod between January 2007 and February 203, the prce ncrease of CO per ltre of HRK caused an average prce ncrease of EUROSUPER 95 per ltre of,403 HRK. Determnaton coeffcent s R , whch means that 95.2% of prce varaton of EUROSUPER 95 s explaned through CO prce change. That amounts to somewhat less than 98%, as t was publshed n 2007 n the USA [5], [2]. Snce the VAT rate changed twce n the montored perod, a multple regresson model has been made. Ths model ncludes three ndependent varables montored n the perod between January 2007 and February 202:. CO on the European market Brent [6]; 2. USD/HRK mdpont exchange rate posted by the Croatan Natonal Bank (Exchange rate lst, Croatan Natonal Bank s archve); 3. VAT rate. The dependant varable s the prce of EUROSUPER 95 per ltre at INA gasolne statons [8]. Data CO prces and exchange rate were collected on the day pror to the prce change of EUROSUPER 95. Results of the analyss have been obtaned through programme package SPSS20 and stepwse method has been used: Source of Varaton Regresson Error Table no. 4 ANOVA Table for Multple Lnear Regresson Degrees of Feedom DF 3 39 Sum of Squares SS 27,426 7,460 Total ,886 Source: authors calculatons 28 Mean Square MS 72,475 0,054 F-rato p-value Snce the p-value s less then 0.05, we reject the null hypothess that all three slope parameters are not all zero, n favour of the alternatve hypothess that at least one slope parameter s dfferent from zero. Varable Table no. 5 Regresson Results for Indvdual Parameters Coeffcent Label Standard Error Estmate p-value Constant CO prce USD X Exchange rate USD/HRK X VAT rate X Source: authors calculatons

6 From the nformaton n Table no. 5 the null hypothess can be rejected for all four varables n regresson model. Based on t-test wth the sgnfcant level the p-values for constant, CO prce, exchange rate and VAT rate are all lower than 0.05 ndcatng suffcent evdence for predctng the gasolne prce. All three ndependent varables and the constant are statstcally sgnfcant, and therefore the equaton of multple regresson model can be drawn up: Y X 0.85 X X (0.493) Parameter nterpretaton: ˆ (0.00) (0.066) (0.029) If the prce of barrel of ol ncreased by USD, and USD/HRK exchange rate and VAT rate stayed unchanged, an average ncrease of the prce of EUROSUPER 95 could be expected, n the amount of kn,.e. 4.2 lpas. ˆ If the USD/HRK exchanged rate ncreased by kn, and ol prce per barrel and VAT rate stayed unchanged, an average ncrease of the prce of EUROSUPER 95 could be expected, n the amount of 0.85 kn,.e. 85, lpas. ˆ The ncrease of VAT rate by %, whereas ol prce per barrel and the USD/HRK exchanged rate reman unchanged, causes an average ncrease of the prce of EUROSUPER 95 by kn,.e lpas. The multple regresson model wth all three predctors produced R , meanng that 96.7% of the varaton of gasolne prce s explaned by the ndependent varables. Ths means that 3.3% of the varaton of EUROSUPER 95 prce reman, and they are not explaned by the regresson model. Ths ncludes the prce of storng, season varatons, but also potental manpulaton of prces done by the ol companes. Conclusons Crude ol s one of major energy sources. There are dfferent factors whch have an nfluence on the formng of ol prce on the world market, such as: supply and demand correlaton, wars n the Mddle East, stock confnement, OPEC monopoly prcng, ncreased demand caused by the huge growth of Chnese and Indan economes, hurrcanes and strkes of ol rgs employees, etc. The ol crss, whch has been a cause of large ncrease and fluctuaton of ol prce on the world market n recent years, has led to many questons such as the questonablty of the formula used for prce formng of petroleum products n the Republc of Croata. In the Republc of Croata, due to the Ol and Petroleum Products Market Act, t s not the CO prce that s used for the formaton of petroleum product prce, but the petroleum product prce on the Medterranean market. Therefore, certan doubts n the possble manpulatng of prces may rse, n order for ol companes to reach hgher profts. Ths paper has offered the regresson model whch s used to analyze the nfluence of fluctuatons n CO prce on the world market, USD/HRK exchange rate and VAT rate on the prce of petroleum products n the Republc of Croata n the perod between January 2007 and February 203, and the followng results have been obtaned: CO prce, exchange rate and VAT rate have statstcally sgnfcantly nfluenced fluctuatons of EUROSUPER 95 prce; CO prce, exchange rate and VAT rate explan 96.7% of varatons n prce of EUROSUPER 95; 29

7 ncrease n prce of one ltre of CO by one kuna has caused the ncrease n prce of one ltre of EUROSUPER 95 by.40 HRK. Ths paper has offered answers to some relevant questons and has shown that there s a statstcally sgnfcant nfluence of CO prce on the prce of petroleum product EUROSUPER 95. Some future researches ought to be able to explan those 3.3% varatons whch were not explaned by the proposed model. One of phenomena to be explored s a potental asymmetry whch occurs whle formng petroleum products prce. Is t possble that gasolne prces respond more quckly when ol prces are rsng than when ol prces are fallng? References [] Alvarez-Ramrez, J., Csneros, M., Ibrra-Valdez, C., Sornao, A., (2002), Multfractal Hurst analys of crude ol prces, Physca A 33 [2] Sekulć, G., (2008), Crude ol n World Energy 2007/2008 how to contnue, EGE, 4/2008, Energy marketng d.o.o., Zagreb [3] Ol and Petroleum Products Market Act, Offcal Gazette 57/06 [4] By-law on petroleum product prce formng, Offcal Gazette 37/ [5] Brown, S.P.A., Vrman, R., (2007), What's Drvng Gasolne Prces?, Economc Letter, Federal Reserve Bank of Dallas, ssue Oct.2007, Vol.2, No.0 [6] Ycharts: Brent Crude Ol Spot Prce, (Aprl 22, 203) [7] Azcel, A. D., Sounderpandan, (2009), Complete Busness Statstcs, seventh edton, McGraw-Hll Irvn Seres, USA [8] HAK, Fuel prces, (Aprl 20, 203) 30