Title Page
ABSTRACT
Contents
1. INTRODUCTION 15
1.1. Background information 15
1.2. Purpose of research 17
1.3. Research Methodology 18
2. LITERATURE REVIEW 19
3. RELATIONSHIP BETWEEN OIL PRICES AND STOCK MARKET AND EXCHANGE RATE IN THE RUSSIAN FEDERATION 26
3.1. Petroleum Industry 26
3.1.1. Crude Oil Benchmarks 28
3.1.2. International oil market and price development history 34
3.1.3. Global Demand and Supply 42
3.2. Russian Petroleum Industry 50
3.3 Stock market indices and exchange rate in the Russian Federation 55
3.3.1. Stock Market of Russia 56
3.3.2. MICEX and RTS indexes 57
3.3.3. Russian Exchange Rate 61
4. STATISTICAL MODEL 65
4.1. Theoretical Background 65
4.2. VAR and VAR-ECM models 67
5. PLEMINARY DATA ANALYSIS 72
5.1. Data explanation 72
5.2. Unit Root Tests 77
5.3. Lag Length Selection and Granger Causality Test 79
5.4. Cointegration Tests 81
6. EMPIRICAL ANALYSIS 84
6.1. Estimation results 84
6.2. Impulse Response Function 88
6.3. Variance Decomposition 90
7. CONCLUDING REMARKS 93
REFERENCES 97
APPENDIX 105
Table 3.1. Distribution of Global Proven Reserves in 2016 105
Table 3.2. Russia's Macroeconomic Indicators and Brent Crude Oil Price, 2000-2021 106
Table 3.3. Chronology of recent events on the Stock market in Russia 59
Table 5.1. Summary Statistics 111
Table 5.2. Unit Root Tests 112
Table 5.3. Lag Length Selection 113
Table 5.4. Granger Causality Test 115
Table 5.5. Johansen's Cointegration Tests 116
Table 5.6. (A) Estimation Results of Conventional VAR for LMOEX, LBRENTOIL, LDUBAIOIL and LWTIOIL 117
Table 5.6. (B) Impulse Response Function 119
Table 5.6. (C) Variance Decomposition 120
Table 5.7. (A) Estimation Results of Conventional VAR for LRTS, LBRENTOIL, LDUBAIOIL and LWTIOIL 122
Table 5.7. (B) Impulse Response Function 125
Table 5.7. (C) Variance Decomposition 126
Table 5.8. (A) Estimation Results of Conventional VAR for LEXCHRATE, LBRENTOIL, LDUBAIOIL and LWTIOIL 128
Table 5.8. (B) Impulse Response Function 130
Table 5.8. (C) Variance Decomposition 131
Figure 3.1. Petroleum Value Chain 27
Figure 3.2. Distribution of Global Proven Reserves in 2018 30
Figure 3.3. History of Oil Prices, 2005-2021 36
Figure 3.4. The interaction between Oil Price and the value of Ruble 40
Figure 3.5. World oil production by region, 1971-2020 43
Figure 3.6. World top crude exporters, 1997-2019 48
Figure 3.7. Russia's Oil Production and Consumption, 2005-2020 (million barrels per day) 51
Figure 3.8. Key Trends in Russia's Oil Sector, 2000 and 2009 (million tons) 53
Figure 3.9. Russia crude oil export by destination, 2020 107
Figure 3.10. MICEX and RTS index rate 108
Figure 3.11. Exchange rate (2005-2021) 62
Figure 5.1. Individual series of variables, (2005-2021) 109
Figure 5.2. AR Roots Graphs 114