Publication: Crude Oil Prices : Predicting Price Differentials Based on Quality
Loading...
Published
2004-10
ISSN
Date
2012-08-13
Author(s)
Bacon, Robert
Editor(s)
Abstract
Many developing countries are becoming oil exporters, producing crude oils that often differ markedly in quality from those principally traded. Governments must predict the prices of such crudes, to forecast revenue and evaluate the fairness of the price they receive from companies selling on their behalf. Oil companies, and industry consultants, have models for analyzing price differentials with well-known "marker" crudes, but these models have not been widely known, or adapted to account for increasingly important quality characteristics, such as acidity. This note explains a methodology for price analysis, and a new extension for incorporating acidity, which can have a big effect on the price differential.
Link to Data Set
Citation
“Bacon, Robert; Tordo, Silvana. 2004. Crude Oil Prices : Predicting Price Differentials Based on Quality. Viewpoint. © World Bank. http://hdl.handle.net/10986/11250 License: CC BY 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Publication Competition and Poverty(World Bank, Washington, DC, 2016-04)A literature review shows competition policy reforms can deliver benefits for the poorest households and improve income distribution. A lack of competition in food markets hurts the poorest households the most. Competition in input markets and between buyers helps farmers and small businesses. And more competitive markets bolster job growth over the longer term. More research is needed, however, to better understand the impact of competition reforms and antitrust enforcement on poverty and shared prosperity.Publication Investment Climate in Africa(World Bank, Washington, DC, 2015-07-01)The World Bank Group has been working on investment climate reform in Sub-Saharan Africa for nearly a decade, a period characterized by dramatic economic growth on the continent. Establishing links between such reform interventions and economic growth, however, is a complex problem. Although this note finds some connection between investment climate reform and economic growth, establishing more concrete evidence of causation will require greater focus at the country level, as well as on small and medium enterprises. This is where investment climate interventions generate change.Publication Export Competitiveness(World Bank, Washington, DC, 2015-06)This review of the empirical literature shows that industries with more intense domestic competition will export more. Competition law enforcement can be traced to export performance and is complementary to trade reforms. Pro-competition market regulation that reduces restrictions and promotes competition, where it is viable, is an important determinant for trade. The elimination of barriers to entry and rivalry, and a level playing field in upstream sectors contributes to export competitiveness in downstream manufacturing sectors. In some sectors, effective competition policy can directly lower trade costs.Publication Small Business Tax Regimes(World Bank, Washington, DC, 2016-02)Simplified tax regimes for micro and small enterprises in developing countries are intended to facilitate voluntary tax compliance. However, survey evidence suggests that small business taxation based on simplified bookkeeping or turnover is sometimes perceived as too complex for microenterprises in countries with high illiteracy levels. Very simple fixed tax regimes not requiring any books or records tend to be overly popular but prone to abuse. System reforms will require more precise tailoring of the simplified regimes to their target beneficiaries, coupled with strong compliance management to detect and deter abuse. The overall objective of simplified taxation for micro and small enterprises (MSEs) in developing countries is generally to facilitate voluntary tax compliance and remove obstacles in moving toward business formalization and growth.Publication Contract Farming(World Bank, Washington, DC, 2014-10)Contract farming involves production by farmers under agreement with buyers for their outputs. This arrangement can help integrate small-scale farmers into modern agricultural value chains, providing them with inputs, technical assistance, and assured markets. Critics contend that contract partners may subject farmers to abuses. The literature shows that in fact contract farming can raise farm income, but mainly for high-value crops. It also indicates that in many cases firms are willing to work with small farms. This note confirms that conflicts are common between buyers and farmers, and that alternative dispute resolution methods may help resolve them.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Crude Oil Price Differentials and Differences in Oil Qualities : A Statistical Analysis(World Bank, Washington, DC, 2005-10)This report updates and extends previous work by a statistical analysis of the relationship between crude price differentials and three quality differentials, as well as transport costs and seasonal effects. In addition to the API (American Petroleum Institute) gravity number and the sulfur content of the crudes, which are the qualities generally included in existing analysis, the report presents the impact of acidity (measured by the Total Acid Number - TAN) on the price differential. This is because acidity has become increasingly important as the volume of high acid crudes, particularly from West Africa, has steadily increased in recent years.Publication Fuel Pricing and Subsidies in Indonesia : Reaching an Equitable and Sustainable Policy(Washington, DC, 2012)Indonesia is an oil producing country and is the only East Asian member of the Organization of Petroleum Exporting Countries (OPEC). Over the years, this endowment of oil resources has been steadily exploited with substantial rents flowing to the government from production and exports of crude oil. The country is also one of the world's largest exporters of another petroleum resource, liquefied natural gas. The introduction of a new oil and gas law in 2001 (the law) provides the policy and legal basis for moving away from the present ineffective and fiscally inefficient fuel pricing and subsidy regime, towards the goal of an independent, reliable, transparent, competitive, efficient, and environmentally friendly petroleum sector that encourages the growth of the national potential and role and at the same time does not exclude the Government of Indonesia (GoI) fully meeting its social responsibility towards certain community groups. Implementation towards achieving the goals set out in the Law has been slow and hesitant. The Indonesian treasury is still saddled with a rather inefficient and ineffective fuel pricing and subsidies regime. This present report identifies a way forward for Indonesia to meet the requirements of the Law. That way forward will progressively eliminate the waste inherent in the present system, signal correct market behaviors to consumers, achieve large fiscal savings and help the economy grow while the any negative impact on the poor and vulnerable are cushioned. Chapter one tracks the recent history to the present situation in terms of petroleum fuels utilization, supply, pricing and subsidies, and identifies some of the key impacts of the prevailing policies. Chapter two identifies the target petroleum fuel market regime based on the goals established in the law, evaluates where the present policy falls short, and proposes measures that will help Indonesia achieve the outcomes that are consistent with the law. Chapter three proposes a step-wise transition that will be required to transform the present regime and at the same time opening the oil products market to the beneficial forces of competition and restructuring Pertamina's downstream operations.Publication Natural Oil Companies and Value Creation(World Bank, 2011-07-13)Approximately two billion dollars a day of petroleum are traded worldwide, which makes petroleum the largest single item in the balance of payments and exchanges between nations. Petroleum represents the larger share in total energy use for most net exporters and net importers. While petroleum taxes are a major source of income for more than 90 countries in the world, poor countries net importers are more vulnerable to price increases than most industrialized economies. This paper has five chapters. Chapter one describes the key features of upstream, midstream, and downstream petroleum operations and how these may impact value creation and policy options. Chapter two draws on ample literature and discusses how changes in the geopolitical and global economic environment and in the host governments' political and economic priorities have affected the rationale for and behavior of National Oil Companies' (NOCs). Rather than providing an in-depth analysis of the philosophical reasons for creating aNOC, this chapter seeks to highlight the special nature of NOCs and how it may affect their existence, objectives, regulation, and behavior. Chapter three proposes a value creation index to measure the contribution of NOCs to social value creation. A conceptual model is also proposed to identify the factors that affect value creation. Chapter four presents the result of an exploratory statistical analysis aimed to determine the relative importance of the drivers of value creation. In addition, the experience of a selected sample of NOCs is analyzed in detail, and lessons of general applicability are derived. Finally, Chapter five summarizes the conclusions.Publication Drawing a Roadmap for Oil Pricing Reform(World Bank, Washington, DC, 2013-05)In 2011, the median oil imports rose to 5 percent of gross domestic product for net importers. In the past several years, many governments have not passed through the world oil price increases to consumers fully. As a sign of divergent pricing policies, the retail prices of gasoline, diesel, and cooking gas in January 2013 varied by a factor of 190, 250, and 70, respectively, across developing countries. Policies to keep oil product prices low to benefit the economy and protect the poor have had a number of unintended negative consequences, including flourishing corruption in the oil sector and entrenchment of monopoly operators or inefficient firms through which subsidies are channeled, stifling competition and raising costs. The path to market-based pricing depends on the starting conditions: the gap between current and market-based price levels, the level of public awareness about the extent of departure from market prices, the degree of market concentration and competition in downstream oil, the subsidy delivery mechanism where subsidies are provided, the robustness of social service delivery, and the perceived credibility of the government. The evidence presented in this paper suggests that pricing reform often does not have a clear end and should instead be viewed as a continuous process of adjustment and search for mechanisms that take into account the country's institutions and political system, and the oil sector's market structure, infrastructure, and history.Publication Managing Resource Rents : The Special Challenges in Postconflict Countries(World Bank, Washington, DC, 2006-02)Resource flows from extractive industries can be a lifeline for postconflict countries, helping to fund critical reconstruction needs. But these resources present issues not found elsewhere in the economy and need to be well managed. Sector governance principles that apply to oil-producing countries in general are even more important in postconflict countries. This note discusses these principles and shows how they apply in two cases, Timor-Leste and Sudan.
Users also downloaded
Showing related downloaded files
Publication World Development Report 2006(Washington, DC, 2005)This year’s Word Development Report (WDR), the twenty-eighth, looks at the role of equity in the development process. It defines equity in terms of two basic principles. The first is equal opportunities: that a person’s chances in life should be determined by his or her talents and efforts, rather than by pre-determined circumstances such as race, gender, social or family background. The second principle is the avoidance of extreme deprivation in outcomes, particularly in health, education and consumption levels. This principle thus includes the objective of poverty reduction. The report’s main message is that, in the long run, the pursuit of equity and the pursuit of economic prosperity are complementary. In addition to detailed chapters exploring these and related issues, the Report contains selected data from the World Development Indicators 2005‹an appendix of economic and social data for over 200 countries. This Report offers practical insights for policymakers, executives, scholars, and all those with an interest in economic development.Publication Argentina Country Climate and Development Report(World Bank, Washington, DC, 2022-11)The Argentina Country Climate and Development Report (CCDR) explores opportunities and identifies trade-offs for aligning Argentina’s growth and poverty reduction policies with its commitments on, and its ability to withstand, climate change. It assesses how the country can: reduce its vulnerability to climate shocks through targeted public and private investments and adequation of social protection. The report also shows how Argentina can seize the benefits of a global decarbonization path to sustain a more robust economic growth through further development of Argentina’s potential for renewable energy, energy efficiency actions, the lithium value chain, as well as climate-smart agriculture (and land use) options. Given Argentina’s context, this CCDR focuses on win-win policies and investments, which have large co-benefits or can contribute to raising the country’s growth while helping to adapt the economy, also considering how human capital actions can accompany a just transition.Publication Lebanon Economic Monitor, Fall 2022(Washington, DC, 2022-11)The economy continues to contract, albeit at a somewhat slower pace. Public finances improved in 2021, but only because spending collapsed faster than revenue generation. Testament to the continued atrophy of Lebanon’s economy, the Lebanese Pound continues to depreciate sharply. The sharp deterioration in the currency continues to drive surging inflation, in triple digits since July 2020, impacting the poor and vulnerable the most. An unprecedented institutional vacuum will likely further delay any agreement on crisis resolution and much needed reforms; this includes prior actions as part of the April 2022 International Monetary Fund (IMF) staff-level agreement (SLA). Divergent views among key stakeholders on how to distribute the financial losses remains the main bottleneck for reaching an agreement on a comprehensive reform agenda. Lebanon needs to urgently adopt a domestic, equitable, and comprehensive solution that is predicated on: (i) addressing upfront the balance sheet impairments, (ii) restoring liquidity, and (iii) adhering to sound global practices of bail-in solutions based on a hierarchy of creditors (starting with banks’ shareholders) that protects small depositors.Publication Classroom Assessment to Support Foundational Literacy(Washington, DC: World Bank, 2025-03-21)This document focuses primarily on how classroom assessment activities can measure students’ literacy skills as they progress along a learning trajectory towards reading fluently and with comprehension by the end of primary school grades. The document addresses considerations regarding the design and implementation of early grade reading classroom assessment, provides examples of assessment activities from a variety of countries and contexts, and discusses the importance of incorporating classroom assessment practices into teacher training and professional development opportunities for teachers. The structure of the document is as follows. The first section presents definitions and addresses basic questions on classroom assessment. Section 2 covers the intersection between assessment and early grade reading by discussing how learning assessment can measure early grade reading skills following the reading learning trajectory. Section 3 compares some of the most common early grade literacy assessment tools with respect to the early grade reading skills and developmental phases. Section 4 of the document addresses teacher training considerations in developing, scoring, and using early grade reading assessment. Additional issues in assessing reading skills in the classroom and using assessment results to improve teaching and learning are reviewed in section 5. Throughout the document, country cases are presented to demonstrate how assessment activities can be implemented in the classroom in different contexts.Publication The Journey Ahead(Washington, DC: World Bank, 2024-10-31)The Journey Ahead: Supporting Successful Migration in Europe and Central Asia provides an in-depth analysis of international migration in Europe and Central Asia (ECA) and the implications for policy making. By identifying challenges and opportunities associated with migration in the region, it aims to inform a more nuanced, evidencebased debate on the costs and benefits of cross-border mobility. Using data-driven insights and new analysis, the report shows that migration has been an engine of prosperity and has helped address some of ECA’s demographic and socioeconomic disparities. Yet, migration’s full economic potential remains untapped. The report identifies multiple barriers keeping migration from achieving its full potential. Crucially, it argues that policies in both origin and destination countries can help maximize the development impacts of migration and effectively manage the economic, social, and political costs. Drawing from a wide range of literature, country experiences, and novel analysis, The Journey Ahead presents actionable policy options to enhance the benefits of migration for destination and origin countries and migrants themselves. Some measures can be taken unilaterally by countries, whereas others require close bilateral or regional coordination. The recommendations are tailored to different types of migration— forced displacement as well as high-skilled and low-skilled economic migration—and from the perspectives of both sending and receiving countries. This report serves as a comprehensive resource for governments, development partners, and other stakeholders throughout Europe and Central Asia, where the richness and diversity of migration experiences provide valuable insights for policy makers in other regions of the world.