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Thesis Example: Petroleum Product Export Development and Determinants

7 pages
1852 words
George Washington University
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The export of petroleum product has increased over the years. The export of the product has resulted in o the increased trade among countries which has increased trade liberalization. The classical economist view trade to be an equivalent with the engine of economic growth. The exportation of petroleum product among countries represents a form of trade that is highly productive with regards to the oil prices that have continued to rise. An export promotion strategy will bring an advantage to the export petroleum products all over the world. A company or a country needs to have an established a relationship with the country to export the products. The external and internal economies play a major role in determining the levels of export of petroleum products. Putting the emphasis on the promotion of exportation of petroleum products will promote the growth of a country.

The demand for oil depends much on the demand for petroleum products. Refiners will go on purchasing crude oil as long as petroleum products can be exported. When the demand for petroleum products becomes inelastic, the demand for oil does not reduce as oil grows to be expensive (Suleiman and Muhammad, 2011). It is important to consider the effect the demand for oil products have on the petroleum exports in a country. Gasoline is an important product of petroleum together with jet fuel and constitutes bulks of exports in many countries. While the demand for oil is also crucial, it is the demand for oil products which controls the oil market in the world. Non-oil producing and exporting countries are involving the import of oil with a view to refining thus exporting the petroleum products.

The proposition of the foreign domestic investment growth has been controversial in the literature. The export of petroleum products is expected to increase all over the world with a major player in oil manufacturing countries likely to be the beneficiary. The study seeks to also identify the determinants in the export of petroleum all over the world. The role of foreign direct investment is very crucial in the expansion of petroleum exports all over the world. The government possesses a decisive role in facilitating the expansion and development of export of petroleum products. Majority of the research continues to emphasize on the demand on the international market while it is clear that there are other factors that influence the exportation of the petroleum products (Suleiman and Muhammad, 2011). The models focusing on demand only are rather inefficient in the explanation of the performance of the exports in the international market.

As the variety of exports continues to increases in a country, the desired support for more trade liberalization will grow as well. For a country with a single effort, the pressure will be on the government to liberalize trade. If there is no established connection politically, the export business will not have much of an influence in the country while policy will be formed irrespective of the countrys contribution. With strong political ties, the exporting of the petroleum products will be easier and will increase over time as more trade agreements are sought by the government from other countries (Rodrik, 2008). Minimizing the competition from other players in the market will be crucial with the exporter expected to push for subsidies.

Petroleum products form a crucial part of any country economy in the world. There are different products which have been used to achieve various activities to facilitate the economy. Petrol and diesel have been used for a long time to facilitate transport industry. Oil has also become an important product when it comes to generation of electricity. These presents an indication of the role the petroleum products play in economic development. Countries in the developed and developing world tend to rely much on the export of petroleum products (Rodrik, 2008). There is need to ensure an effective and efficient flow of the products in the supply chain all over the world. The activities involving petroleum products need to be harmonized for a country to meet the market demand placed all over the world. The supply and exportation of petroleum products will involve the downstream and upstream chain where the upstream activities include production, exploration, transportation and trading of crude oil. The downstream activities will include the distribution and marketing of the petroleum products (Sharma and Panagiotidis, 2005). In the sub-Saharan Africa, many countries tend to rely on crude oil importation from the producing countries. The countries will have to engage in the logistics globally to get the crude oil although some produce their own crude oil.

Understanding the domestic policies that play a role in the supply of the petroleum products in the market is crucial. The significance of the understanding will help countries to use the study and ensure that the impediments that deter the success of the exportation of the petroleum products are abolished and dealt with. The outcomes of the research will prove useful for countries exporting petroleum products in the formulation of the policies and plans that will help improve and develop the exportation of petroleum products. The empirical magnitude of the determinants as indicated in the study will help the exporting countries to regulate their measures and determinants to cater for the demand of the petroleum products in the global market. The study illuminates on the performance of the export industry specifically on the export of the petroleum products which will prove useful to the related bodies and provide information for policymakers in the export industry.

The research will focus on petroleum product export development and the determinants. The data will be gathered from countries that rely much on the export of petroleum and crude oil and the determinant of export. The study presents a qualitative analysis of the export of petroleum products all over the world and focuses on the effects of the determinants. Petroleum products exports have increased over the recent past and the study seeks to identify the development and the factors impeding and aiding on the success of the export. An empirical formula will be used to identify the impact of the export determinants on petroleum products. A comprehensive literature review will be conducted with data analysis done. The methodology of the study will be a combined qualitative and quantitative collection of data.

2.Statement of the ProblemPetroleum products have continued to occupy the international trade with many non-oil producing countries plying in the trade. The demand for petroleum products has increased which has led to the importation of crude oil by many countries to cater for the export of petroleum products. The determinants of the petroleum products exportation are known to be affected by industrialization and may be affected by different factors compared to other exported products. A clear understanding of the export determinants of exportation of the petroleum products will be the solution of the research paper.

3.Research questions and Objectives

The objective of the study will be to identify and relate the various determinants of exportation of petroleum products among different countries. The general objective of this study is to analyse the macroeconomic determinants of petroleum products development.

The specific objectives of this study are:

1. Capture the effect of external conditions on the exports of petroleum products.

2. Ascertain the importance of trade liberalization episodes in influencing the size of exports of Petroleum goods

3. Ascertain whether the small country assumption is appropriate as far as export of petroleum products is concerned. In the process, the study will calculate multipliers relevant for policy decisions. These include export volume, export price and export revenue multipliers (elasticitys).

4. LITERATURE REVIEWKumar (1998) in his study of dynamic response seen in the Iranian industry output, indicate that exports will depend more on the rates of exchange. They indicate that the government expenditures, real import, inflation and real effective change run asymmetrically to the oil prices innovation which affects the petroleum products export. The increase in oil prices all over the world was depicted to have a positive impact in Iran. The response that is brought by exchange rates and real imports is significant towards the levels of output demanded in the country. The effective exchange rate will oversee the improved export of petroleum products in the country. The response of inflation is also indicated as the determinant is crucial when it comes to exchange rates in the industry. The export of petroleum products sees to rely on different factors.

Suleiman and Muhammad (2011) clearly analyses the effect of the recent variability in oil and petroleum product prices on the exports of Pakistan. The study illustrates the significant effect of fluctuation of the oil prices and the macroeconomic variable in the country. The variables include the human capital, GDP growth rates, and imports. The oil prices impact negatively on the exports of Pakistan. The economy in Pakistan faces a long relationship with the prices of oil becoming volatile and exports represent certain macroeconomic stability for the country. The vulnerability of the petroleum exporting countries prices depended on the state of their economy. Funke and Holly (1992) illustrate that the majority of the approach used in the export industry have concentrated much on demand for the product. The models can be deemed unsuccessful as they fail to explain the long run phenomena in exporting. The study conducted focuses on the supply and the demand of the petroleum products. Applications of the model to the West German exports indicate that the supply of the commodities matters in the explanation of export performance of petroleum products.

According to Riedel, Hall, and Grawe (1984), the exports can be expressed as a ratio to their output with a view of accounting for the expansionary and development measures. The authors investigate quantitatively the existing determinants of exports in India based on an applied time series. The effects of domestic demand, domestic profitability and relative price on the performance of exports are indicated by the report. The domestic markets are indicted to influence the behavior of export. Domestic demand and domestic profitability also influence the level of exports in India. The relative prices only play a major from where the comparative advantage of a product is established. The comparative advantage therefore is also depicted to affect exports in many ways. The study, however, fails to identify the long run practice and cannot be completely applicable to the research. Sharma and Panagiotidis, (2005) in a similar study in India illustrated that the demand for Indias export will continue to increase with a decrease in export prices as compared to the world prices. The appreciation of the Indian rupee is demonstrated to affect exports in the country while higher domestic demand of petroleum products will reduce the supply of exports.

Djankov and Hoekman (1998) report analyses the level to which the export structure existing in Easter Europe will change. The study researches for the relative importance of processing trade, FDI and imports of inputs as the determinants of the exports. The finding seems to suggest that within most countries, the export of machinery and intermediate goods will drive the changes indicated in the export structure. The local enterprises are at the forefront in acquiring knowledge and foreign inputs with...

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