Download In perspective of dependence risk, oil import security is vulnerable

ASSESSMENT OF OIL SUPPLY RISK: THE CASE OF SOUTH ASIA
Mohsin Muhammad, Nanjing University of Aeronautics and Astronautics, Phone +86 13236539012, E-mail:
[email protected]
Peng Zhou, Nanjing University of Aeronautics and Astronautics, Phone +86 25 84892701, E-mail:
[email protected]
Overview
Oil is the main energy source of world. Oil fulfils the major world energy requirements. World’s total oil
imports have risen by 80% from 19990 to 2015.At current situation, 75% of oil is provided and available
by oil importing sources. For this purpose countries need to import oil from the external suppliers but
there is considerable uncertainty about the levels of future oil supply and demand due to imbalance of oil
suppliers and consumers. But currently oil import faces great uncertainties. Oil import risk, oil import
cost, oil prices fluctuation, terrorism and other economic factors will be the major sources of oil supply
security for oil consumers. Also many major oil exporters of South Asian countries are situated in the
North Africa and Middle East having unstable economic and insecure political environment. Highly
dependent chokepoints such as Hormuz and straits of Malacca increase the danger. South Asia is one of
the most oil supply affected regions and often oil in shortage issues happen in the South Asian countries.
Therefore, it is necessary to conduct a quantitative and empirical estimation of oil supply risk trend
among these countries. To find out how much risk is involved in oil supply security is the main concern
of the study.
The paper is organized as follows: After the introduction the second section gives a brief overview about
the comprehensive set of composite indicators (CI). The third section addresses and devoted to presenting
the data and methodology adopted in the paper. In section four we present and discuss the results and
discussions and section five contains conclusions and policy implications.
Methods
Mathematical compositor indicator system
Results
Geopolitical oil risk has a considerable negative relationship with the ratio of domestic oil reserves to
consumption.
In market risk, US dollar index volatility shows an unpredictable situation, and ultimately it increases the
oil purchasing costs.
Infrastructure risk indicators (refinery capacity) helps to increases the oil reserves and domestic oil supply
of the country. Oil prices fluctuations always increased oil import supply risk and economic costs of
imported oil.
In perspective of dependence risk, oil import security is vulnerable by dependence stage of oil supply in
which imported oil is the main risk factor.
Conclusion
A higher CI score value results in a lower oil supply risk and lower oil import dependency, while a lower
CI score results in a higher oil supply risk and oil import dependency. So as conclusion, India is ranked as
the first and least vulnerable country while Afghanistan is ranked and considered as a riskiest country. So
continuous investments in domestic production, stable geopolitical situation exploration and diversifying
supply sources can reduce the oil demand in the world.
References
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