Governing Dynamics of Crude Oil and LNG Prices

Korkut Bekiroglu, Okan Duru, Seshadhri Srinivasan, Rong Su, Constantino Lagoa, Juncheng Li

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Abstract

Crude oil pricing models are frequently studied in energy economics through classical linear regression models subject to various limitations (e.g., normality, stationarity) and diagnostic evidence (e.g., information criterion Occams razor principle). In contrast to conventional practices, sparse identification approach makes a breakthrough in economic analysis by eliminating the vast majority of fundamental assumptions of regression models and supporting noise bound control. This paper proposes a method for modeling the governing dynamics of crude oil and LNG prices by utilizing a bundle (set) of potential inputs. The modeling approach generates a sparse network that models the influences of various factors and also considers the structural breaks in multiple factors. The study is designed on two response variables: Crude oil prices (West Texas Intermediate-WTI, Cushing OK, Dollars per Barrel, monthly averages) and LNG prices (Mont Belvieu TX, Dollars per Gallon, monthly averages). Numerical results reflect the spillover between crude oil and LNG prices driven by substitution in various uses and products (e.g., power systems, generators, petrochemicals such as ethylene resins). In contrast to former studies, sparse network identification prefers SP500 stock market index to represent inflationary component rather than traditional price indices or interest rates. Also, the structural break parameter captures the change in the U.S. oil export regime which can be utilized for re-echoing the analogy of regime shift in future studies.

Original languageEnglish (US)
Title of host publication2018 IEEE 14th International Conference on Control and Automation, ICCA 2018
PublisherIEEE Computer Society
Pages872-877
Number of pages6
ISBN (Print)9781538660898
DOIs
StatePublished - Aug 21 2018
Event14th IEEE International Conference on Control and Automation, ICCA 2018 - Anchorage, United States
Duration: Jun 12 2018Jun 15 2018

Publication series

NameIEEE International Conference on Control and Automation, ICCA
Volume2018-June
ISSN (Print)1948-3449
ISSN (Electronic)1948-3457

Other

Other14th IEEE International Conference on Control and Automation, ICCA 2018
CountryUnited States
CityAnchorage
Period6/12/186/15/18

Fingerprint

Liquefied natural gas
Crude oil
Economic analysis
Linear regression
Petrochemicals
Ethylene
Substitution reactions
Resins
Economics
Costs

All Science Journal Classification (ASJC) codes

  • Artificial Intelligence
  • Computer Science Applications
  • Control and Systems Engineering
  • Electrical and Electronic Engineering
  • Industrial and Manufacturing Engineering

Cite this

Bekiroglu, K., Duru, O., Srinivasan, S., Su, R., Lagoa, C., & Li, J. (2018). Governing Dynamics of Crude Oil and LNG Prices. In 2018 IEEE 14th International Conference on Control and Automation, ICCA 2018 (pp. 872-877). [8444188] (IEEE International Conference on Control and Automation, ICCA; Vol. 2018-June). IEEE Computer Society. https://doi.org/10.1109/ICCA.2018.8444188
Bekiroglu, Korkut ; Duru, Okan ; Srinivasan, Seshadhri ; Su, Rong ; Lagoa, Constantino ; Li, Juncheng. / Governing Dynamics of Crude Oil and LNG Prices. 2018 IEEE 14th International Conference on Control and Automation, ICCA 2018. IEEE Computer Society, 2018. pp. 872-877 (IEEE International Conference on Control and Automation, ICCA).
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Bekiroglu, K, Duru, O, Srinivasan, S, Su, R, Lagoa, C & Li, J 2018, Governing Dynamics of Crude Oil and LNG Prices. in 2018 IEEE 14th International Conference on Control and Automation, ICCA 2018., 8444188, IEEE International Conference on Control and Automation, ICCA, vol. 2018-June, IEEE Computer Society, pp. 872-877, 14th IEEE International Conference on Control and Automation, ICCA 2018, Anchorage, United States, 6/12/18. https://doi.org/10.1109/ICCA.2018.8444188

Governing Dynamics of Crude Oil and LNG Prices. / Bekiroglu, Korkut; Duru, Okan; Srinivasan, Seshadhri; Su, Rong; Lagoa, Constantino; Li, Juncheng.

2018 IEEE 14th International Conference on Control and Automation, ICCA 2018. IEEE Computer Society, 2018. p. 872-877 8444188 (IEEE International Conference on Control and Automation, ICCA; Vol. 2018-June).

Research output: Chapter in Book/Report/Conference proceedingConference contribution

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Bekiroglu K, Duru O, Srinivasan S, Su R, Lagoa C, Li J. Governing Dynamics of Crude Oil and LNG Prices. In 2018 IEEE 14th International Conference on Control and Automation, ICCA 2018. IEEE Computer Society. 2018. p. 872-877. 8444188. (IEEE International Conference on Control and Automation, ICCA). https://doi.org/10.1109/ICCA.2018.8444188