Causality in crude oil prices

Economic media inform on prices of three well established crude oil benchmarks: Brent, WTI and Dubai Fateh. The relevance of these is however declining with their low output - motivating investigation of the pricing dynamics. We apply Granger causality tests to study the price dependencies of 32 crude oils. The aim is to establish what crudes are setting the prices and what crudes are just following the general market trends. The investigation is performed globally as well as for different quality, geographical and organisational segments. The results indicate that crude oil price analysts should follow at least four different crudes that are good price indicators. WTI and Brent still lead the market, but they are not the only crude prices worth paying attention to. In particular, Russian Urals drives global prices in a significant way, and Iran Seri Kerir is a significant price setter within OPEC. Dubai Fateh does not display any significant influence as a price setter, which confirms the lack of dominant benchmark within the segment of medium quality crudes.

Density forecasts of crude-oil prices using option-implied and ARCH-type models

The predictive accuracy of competing crude-oil price forecast densities is investigated for the 1994–2006 period. Moving beyond standard ARCH type models that rely exclusively on past returns, we examine the benefits of utilizing the forward-looking information that is embedded in the prices of derivative contracts. Risk-neutral densities, obtained from panels of crude-oil option prices, are adjusted to reflect real-world risks using either a parametric or a non-parametric calibration approach. The relative performance of the models is evaluated for the entire support of the density, as well as for regions and intervals that are of special interest for the economic agent. We find that non-parametric adjustments of risk-neutral density forecasts perform significantly better than their parametric counterparts. Goodness-of-fit tests and out-of-sample likelihood comparisons favor forecast densities obtained by option prices and non-parametric calibration methods over those constructed using historical returns and simulated ARCH processes. © 2010 Wiley Periodicals, Inc. Jrl Fut Mark 31:727–754, 2011

Causality in crude oil prices

Crude oil markets witness growing disparity between the quality of crudes supplied and demanded in the market. The market share of low-quality crudes is increasing due to the depletion of old fields and increasing demand. This is unnerving the practitioners and affecting the relevance of the traditional benchmark crudes due to the lack of lower quality benchmarks (Montepeque, 2005). In this article, we apply Granger causality tests to study the price dependence of 32 crudes in order to establish which crudes drive other prices and which ones simply follow general market trends. Our results indicate that some of the old benchmarks are still relevant while others can be disregarded. Our results also interestingly show that the low-quality Mediterranean Russian Urals crude, introduced in the late 1990s, has emerged recently as a significant driver of global prices. © 2011 Taylor & Francis.

The effect of blending on selected physical properties of crude oils and their products

A study was made of the effect of blending practice upon selected physical properties of crude oils, and of various base oils and petroleum products, using a range of binary mixtures. The crudes comprised light, medium and heavy Kuwait crude oils. The properties included kinematic viscosity, pour point, boiling point and Reid vapour pressure. The literature related to the prediction of these properties, and the changes reported to occur on blending, was critically reviewed as a preliminary to the study. The kinematic viscosity of petroleum oils in general exhibited non-ideal behaviour upon blending. A mechanism was proposed for this behaviour which took into account the effect of asphaltenes content. A correlation was developed, as a modification of Grunberg's equation, to predict the viscosities of binary mixtures of petroleum oils. A correlation was also developed to predict the viscosities of ternary mixtures. This correlation showed better agreement with experimental data (< 6% deviation for crude oils and 2.0% for base oils) than currently-used methods, i.e. ASTM and Refutas methods. An investigation was made of the effect of temperature on the viscosities of crude oils and petroleum products at atmospheric pressure. The effect of pressure on the viscosity of crude oil was also studied. A correlation was developed to predict the viscosity at high pressures (up to 8000 psi), which gave significantly better agreement with the experimental data than the current method due to Kouzel (5.2% and 6.0% deviation for the binary and ternary mixtures respectively). Eyring's theory of viscous flow was critically investigated, and a modification was proposed which extends its application to petroleum oils. The effect of blending on the pour points of selected petroleum oils was studied together with the effect of wax formation and asphaltenes content. Depression of the pour point was always obtained with crude oil binary mixtures. A mechanism was proposed to explain the pour point behaviour of the different binary mixtures. The effects of blending on the boiling point ranges and Reid vapour pressures of binary mixtures of petroleum oils were investigated. The boiling point range exhibited ideal behaviour but the R.V.P. showed negative deviations from it in all cases. Molecular weights of these mixtures were ideal, but the densities and molar volumes were not. The stability of the various crude oil binary mixtures, in terms of viscosity, was studied over a temperature range of 1oC - 30oC for up to 12 weeks. Good stability was found in most cases.

Multiple attribute decision making approach to petroleum pipeline route selection

Petroleum pipelines are the nervous system of the oil industry, as this transports crude oil from sources to refineries and petroleum products from refineries to demand points. Therefore, the efficient operation of these pipelines determines the effectiveness of the entire business. Pipeline route selection plays a major role when designing an effective pipeline system, as the health of the pipeline depends on its terrain. The present practice of route selection for petroleum pipelines is governed by factors such as the shortest distance, constructability, minimal effects on the environment, and approachability. Although this reduces capital expenditure, it often proves to be uneconomical when life cycle costing is considered. This study presents a route selection model with the application of an Analytic Hierarchy Process (AHP), a multiple attribute decision making technique. AHP considers all the above factors along with the operability and maintainability factors interactively. This system has been demonstrated here through a case study of pipeline route selection, from an Indian perspective. A cost-benefit comparison of the shortest route (conventionally selected) and optimal route establishes the effectiveness of the model.

Uses of frontier efficiency methodologies and multi-criteria decision making for performance measurement in the energy sector

Guest editorial Ali Emrouznejad is a Senior Lecturer at the Aston Business School in Birmingham, UK. His areas of research interest include performance measurement and management, efficiency and productivity analysis as well as data mining. He has published widely in various international journals. He is an Associate Editor of IMA Journal of Management Mathematics and Guest Editor to several special issues of journals including Journal of Operational Research Society, Annals of Operations Research, Journal of Medical Systems, and International Journal of Energy Management Sector. He is in the editorial board of several international journals and co-founder of Performance Improvement Management Software. William Ho is a Senior Lecturer at the Aston University Business School. Before joining Aston in 2005, he had worked as a Research Associate in the Department of Industrial and Systems Engineering at the Hong Kong Polytechnic University. His research interests include supply chain management, production and operations management, and operations research. He has published extensively in various international journals like Computers & Operations Research, Engineering Applications of Artificial Intelligence, European Journal of Operational Research, Expert Systems with Applications, International Journal of Production Economics, International Journal of Production Research, Supply Chain Management: An International Journal, and so on. His first authored book was published in 2006. He is an Editorial Board member of the International Journal of Advanced Manufacturing Technology and an Associate Editor of the OR Insight Journal. Currently, he is a Scholar of the Advanced Institute of Management Research. Uses of frontier efficiency methodologies and multi-criteria decision making for performance measurement in the energy sector This special issue aims to focus on holistic, applied research on performance measurement in energy sector management and for publication of relevant applied research to bridge the gap between industry and academia. After a rigorous refereeing process, seven papers were included in this special issue. The volume opens with five data envelopment analysis (DEA)-based papers. Wu et al. apply the DEA-based Malmquist index to evaluate the changes in relative efficiency and the total factor productivity of coal-fired electricity generation of 30 Chinese administrative regions from 1999 to 2007. Factors considered in the model include fuel consumption, labor, capital, sulphur dioxide emissions, and electricity generated. The authors reveal that the east provinces were relatively and technically more efficient, whereas the west provinces had the highest growth rate in the period studied. Ioannis E. Tsolas applies the DEA approach to assess the performance of Greek fossil fuel-fired power stations taking undesirable outputs into consideration, such as carbon dioxide and sulphur dioxide emissions. In addition, the bootstrapping approach is deployed to address the uncertainty surrounding DEA point estimates, and provide bias-corrected estimations and confidence intervals for the point estimates. The author revealed from the sample that the non-lignite-fired stations are on an average more efficient than the lignite-fired stations. Maethee Mekaroonreung and Andrew L. Johnson compare the relative performance of three DEA-based measures, which estimate production frontiers and evaluate the relative efficiency of 113 US petroleum refineries while considering undesirable outputs. Three inputs (capital, energy consumption, and crude oil consumption), two desirable outputs (gasoline and distillate generation), and an undesirable output (toxic release) are considered in the DEA models. The authors discover that refineries in the Rocky Mountain region performed the best, and about 60 percent of oil refineries in the sample could improve their efficiencies further. H. Omrani, A. Azadeh, S. F. Ghaderi, and S. Abdollahzadeh presented an integrated approach, combining DEA, corrected ordinary least squares (COLS), and principal component analysis (PCA) methods, to calculate the relative efficiency scores of 26 Iranian electricity distribution units from 2003 to 2006. Specifically, both DEA and COLS are used to check three internal consistency conditions, whereas PCA is used to verify and validate the final ranking results of either DEA (consistency) or DEA-COLS (non-consistency). Three inputs (network length, transformer capacity, and number of employees) and two outputs (number of customers and total electricity sales) are considered in the model. Virendra Ajodhia applied three DEA-based models to evaluate the relative performance of 20 electricity distribution firms from the UK and the Netherlands. The first model is a traditional DEA model for analyzing cost-only efficiency. The second model includes (inverse) quality by modelling total customer minutes lost as an input data. The third model is based on the idea of using total social costs, including the firm’s private costs and the interruption costs incurred by consumers, as an input. Both energy-delivered and number of consumers are treated as the outputs in the models. After five DEA papers, Stelios Grafakos, Alexandros Flamos, Vlasis Oikonomou, and D. Zevgolis presented a multiple criteria analysis weighting approach to evaluate the energy and climate policy. The proposed approach is akin to the analytic hierarchy process, which consists of pairwise comparisons, consistency verification, and criteria prioritization. In the approach, stakeholders and experts in the energy policy field are incorporated in the evaluation process by providing an interactive mean with verbal, numerical, and visual representation of their preferences. A total of 14 evaluation criteria were considered and classified into four objectives, such as climate change mitigation, energy effectiveness, socioeconomic, and competitiveness and technology. Finally, Borge Hess applied the stochastic frontier analysis approach to analyze the impact of various business strategies, including acquisition, holding structures, and joint ventures, on a firm’s efficiency within a sample of 47 natural gas transmission pipelines in the USA from 1996 to 2005. The author finds that there were no significant changes in the firm’s efficiency by an acquisition, and there is a weak evidence for efficiency improvements caused by the new shareholder. Besides, the author discovers that parent companies appear not to influence a subsidiary’s efficiency positively. In addition, the analysis shows a negative impact of a joint venture on technical efficiency of the pipeline company. To conclude, we are grateful to all the authors for their contribution, and all the reviewers for their constructive comments, which made this special issue possible. We hope that this issue would contribute significantly to performance improvement of the energy sector.

Price transmission in the EU wholesale petroleum markets

This article employs nonlinear smooth transition models to analyze the relationship between upstream and midstream prices of petroleum products. We test for the presence of nonlinearities in price linkages using both weekly series constructed using official EU procedures and also daily industry series applied for the first time. Our results show that the estimated shape of the transition function and equilibrium reversion path depend on the frequency of the price dataset. Our analysis of the crude oil to wholesale price transmission provides evidence of nonlinearities when prices are observed with daily frequency. The nature of the nonlinearities provides evidence in support of the existence of menu costs or, more generally, frictions in the markets rather than supply adjustment costs. This result differs from that found for the U.S. petroleum markets. © 2012 American Statistical Association.

Experimental investigation of performance, emission and combustion characteristics of an indirect injection multi-cylinder CI engine fuelled by blends of de-inking sludge pyrolysis oil with biodiesel

De-inking sludge can be converted into useful forms of energy to provide economic and environmental benefits. In this study, pyrolysis oil produced from de-inking sludge through an intermediate pyrolysis technique was blended with biodiesel derived from waste cooking oil, and tested in a multi-cylinder indirect injection type CI engine. The physical and chemical properties of pyrolysis oil and its blends (20 and 30 vol.%) were measured and compared with those of fossil diesel and pure biodiesel (B100). Full engine power was achieved with both blends, and very little difference in engine performance and emission results were observed between 20% and 30% blends. At full engine load, the brake specific fuel consumption on a volume basis was around 6% higher for the blends when compared to fossil diesel. The brake thermal efficiencies were about 3-6% lower than biodiesel and were similar to fossil diesel. Exhaust gas emissions of the blends contained 4% higher CO2 and 6-12% lower NOx, as compared to fossil diesel. At full load, CO emissions of the blends were decreased by 5-10 times. The cylinder gas pressure diagram showed stable engine operation with the 20% blend, but indicated minor knocking with 30% blend. Peak cylinder pressure of the 30% blend was about 5-6% higher compared to fossil diesel. At full load, the peak burn rate of combustion from the 30% blend was about 26% and 12% higher than fossil diesel and biodiesel respectively. In comparison to fossil diesel the combustion duration was decreased for both blends; for 30% blend at full load, the duration was almost 12% lower. The study concludes that up to 20% blend of de-inking sludge pyrolysis oil with biodiesel can be used in an indirect injection CI engine without adding any ignition additives or surfactants.

Combustion of fuel blends containing digestate pyrolysis oil in a multi-cylinder compression ignition engine

Digestate from the anaerobic digestion conversion process is widely used as a farm land fertiliser. This study proposes an alternative use as a source of energy. Dried digestate was pyrolysed and the resulting oil was blended with waste cooking oil and butanol (10, 20 and 30 vol.%). The physical and chemical properties of the pyrolysis oil blends were measured and compared with pure fossil diesel and waste cooking oil. The blends were tested in a multi-cylinder indirect injection compression ignition engine.Engine combustion, exhaust gas emissions and performance parameters were measured and compared with pure fossil diesel operation. The ASTM copper corrosion values for 20% and 30% pyrolysis blends were 2c, compared to 1b for fossil diesel. The kinematic viscosities of the blends at 40 C were 5–7 times higher than that of fossil diesel. Digested pyrolysis oil blends produced lower in-cylinder peak pressures than fossil diesel and waste cooking oil operation. The maximum heat release rates of the blends were approximately 8% higher than with fossil diesel. The ignition delay periods of the blends were higher; pyrolysis oil blends started to combust late and once combustion started burnt quicker than fossil diesel. The total burning duration of the 20% and 30% blends were decreased by 12% and 3% compared to fossil diesel. At full engine load, the brake thermal efficiencies of the blends were decreased by about 3–7% when compared to fossil diesel. The pyrolysis blends gave lower smoke levels; at full engine load, smoke level of the 20% blend was 44% lower than fossil diesel. In comparison to fossil diesel and at full load, the brake specific fuel consumption (wt.) of the 30% and 20% blends were approximately 32% and 15% higher. At full engine load, the CO emission of the 20% and 30% blends were decreased by 39% and 66% with respect to the fossil diesel. Blends CO2 emissions were similar to that of fossil diesel; at full engine load, 30% blend produced approximately 5% higher CO2 emission than fossil diesel. The study concludes that on the basis of short term engine experiment up to 30% blend of pyrolysis oil from digestate of arable crops can be used in a compression ignition engine.

Combustion and emission characteristics of a typical biodiesel engine operated on waste cooking oil derived biodiesel

Waste cooking oils can be converted into fuels to provide economical and environmental benefits. One option is to use such fuels in stationary engines for electricity generation, co-generation or tri-generation application. In this study, biodiesel derived from waste cooking oil was tested in an indirect injection type 3-cylinder Lister Petter biodiesel engine. We compared the combustion and emission characteristics with that of fossil diesel operation. The physical and chemical properties of pure biodiesel (B100) and its blends (20% and 60% vol.) were measured and compared with those of diesel. With pure biodiesel fuel, full engine power was achieved and the cylinder gas pressure diagram showed stable operation. At full load, peak cylinder pressure of B100 operation was almost similar to diesel and peak burn rate of combustion was about 13% higher than diesel. For biodiesel operation, occurrences of peak burn rates were delayed compared to diesel. Fuel line injection pressure was increased by 8.5-14.5% at all loads. In comparison to diesel, the start of combustion was delayed and 90% combustion occurred earlier. At full load, the total combustion duration of B100 operation was almost 16% lower than diesel. Biodiesel exhaust gas emissions contained 3% higher CO2 and 4% lower NOx, as compared to diesel. CO emissions were similar at low load condition, but were decreased by 15 times at full load. Oxygen emission decreased by around 1.5%. Exhaust gas temperatures were almost similar for both biodiesel and diesel operation. At full engine load, the brake specific fuel consumption (on a volume basis) and brake thermal efficiency were respectively about 2.5% and 5% higher compared to diesel. Full engine power was achieved with both blends, and little difference in engine performance and emission results were observed between 20% and 60% blends. The study concludes that biodiesel derived from waste cooking oil gave better efficiency and lower NOx emissions than standard diesel. Copyright © 2012 SAE International.

Upgrading fast pyrolysis liquids:blends of biodiesel and pyrolysis oil

Fast pyrolysis liquid or bio-oil has been used in engines with limited success. It requires a pilot fuel and/or an additive for successful combustion and there are problems with materials and liquid properties. It is immiscible with all conventional hydrocarbon fuels. Biodiesel, a product of esterification of vegetable oil with an alcohol, is widely used as a renewable liquid fuel as an additive to diesel at up to 20%. There are however limits to its use in conventional engines due to poor low temperature performance and variability in quality from a variety of vegetable oil qualities and variety of esterification processes. Within the European Project Bioliquids-CHP - a joint project between the European Commission and Russia - a study was undertaken to develop small scale CHP units based on engines and microturbines fuelled with bioliquids from fast pyrolysis and methyl esters of vegetable oil. Blends of bio-oil and biodiesel were evaluated and tested to overcome some of the disadvantages of using either fuel by itself. An alcohol was used as the co-solvent in the form of ethanol, 1-butanol or 2-propanol. Visual inspection of the blend homogeneity after 48 h was used as an indicator of the product stability and the results were plotted in a three phase chart for each alcohol used. An accelerated stability test was performed on selected samples in order to predict its long term stability. We concluded that the type and quantity of alcohol is critical for the blend formation and stability. Using 1-butanol gave the widest selection of stable blends, followed by blends with 2-propanol and finally ethanol, thus 1-butanol blends accepted the largest proportion of bio-oil in the mixture. © 2013 Elsevier Ltd. All rights reserved.

Performance, emission and combustion characteristics of an indirect injection (IDI) multi-cylinder compression ignition (CI) engine operating on neat jatropha and karanj oils preheated by jacket water

Renewable non-edible plant oils such as jatropha and karanj have potential to substitute fossil diesel fuels in CI engines. A multi-cylinder water cooled IDI type CI engine has been tested with jatropha and karanj oils and comparisons made against fossil diesel. The physical and chemical properties of the three fuels were measured to investigate the suitability of jatropha and karanj oils as fuels for CI engines. The engine cooling water circuit and fuel supply systems were modified such that hot jacket water preheated the neat plant oil prior to injection. Between jatropha and karanj there was little difference in the performance, emission and combustion results. Compared to fossil diesel, the brake specific fuel consumption on volume basis was around 3% higher for the plant oils and the brake thermal efficiency was almost similar. Jatropha and karanj operation resulted in higher CO 2 and NO x emissions by 7% and 8% respectively, as compared to diesel. The cylinder gas pressure diagram showed stable engine operation with both plant oils. At full load, the plant oils gave around 3% higher peak cylinder pressure than fossil diesel. With the plant oils, cumulative heat release was smaller at low load and almost similar at full load, compared to diesel. At full load, the plant oils exhibited 5% shorter combustion duration. The study concludes that the IDI type CI engine can be efficiently operated with neat jatropha (or karanj) oil preheated by jacket water, after small modifications of the engine cooling and fuel supply circuits. © 2012 Elsevier Ltd.

Pyrolysis liquids and gases as alternative fuels in internal combustion engines:a review

Liquids and gases produced through biomass pyrolysis have potential as renewable fuels to replace fossil fuels in conventional internal combustion engines. This review compares the properties of pyrolysis fuels, produced from a variety of feedstocks and using different pyrolysis techniques, against those of fossil fuels. High acidity, the presence of solid particles, high water content, high viscosity, storage and thermal instability, and low energy content are typical characteristics of pyrolysis liquids. A survey of combustion, performance and exhaust emission results from the use of pyrolysis liquids (both crude and up-graded) in compression ignition engines is presented. With only a few exceptions, most authors have reported difficulties associated with the adverse properties of pyrolysis liquids, including: corrosion and clogging of the injectors, long ignition delay and short combustion duration, difficulty in engine start-up, unstable operation, coking of the piston and cylinders and subsequent engine seizure. Pyrolysis gas can be used more readily, either in spark ignition or compression ignition engines; however, NO reduction techniques are desirable. Various approaches to improve the properties of pyrolysis liquids are discussed and a comparison of the properties of up-graded vs. crude pyrolysis liquid is included. Further developments in up-gradation techniques, such as hydrocracking and bio-refinery approaches, could lead to the production of green diesel and green gasoline. Modifications required to engines for use with pyrolysis liquids, for example in the fuel supply and injection systems, are discussed. Storage stability and economic issues are also reviewed. Our study presents recent progress and important R&D areas for successful future use of pyrolysis fuels in internal combustion engines.

Experimental investigation of the fuel properties of glidfuel, palm oil mill effluent biodiesel and blends

Biofuels derived from industry waste have potential to substitute fossil fuels (Diesel and Gasoline) in internal combustion (IC) engines. Use of waste streams as fuels would help to reduce considerably life-cycle greenhouse gas emissions and minimise waste processing costs. In this study an investigation into the fuel properties of two waste derived biofuels were carried out, they are: (i) Glidfuel (GF) biofuel - a waste stream from paper industry, and (ii) Palm Oil Mill Effluent (POME) biodiesel - biodiesel produced from palm oil industry effluent through various treatment and transesterification process. GF and POME was mixed together at various proportions and separately with fossil diesel (FD) to assess the miscibility and various physical and chemical properties of the blends. Fuel properties such as kinematic viscosity, higher heating value, water content, acid number, density, flash point temperature, CHNO content, sulphur content, ash content, oxidation stability, cetane number and copper corrosion ratings of all the fuels were measured. The properties of GF, POME and various blends were compared with the corresponding properties of the standard FD. Significance of the fuel properties and their expected effects on combustion and exhaust emission characteristics of the IC engine were discussed. Results showed that most properties of both GF and POME biodiesel were comparable to FD. Both GF and POME were miscible with each other, and also separately with the FD. Flash point temperatures of GF and POME biodiesel were 40.7°C and 158.7°C respectively. The flash point temperature of GF was about 36% lower than corresponding FD. The water content in GF and FD were 0.74 (% wt) and 0.01 (% wt) respectively. Acidity values and corrosion ratings of both GF and POME biodiesel were low compared to corresponding value for FD. The study concluded that optimum GF-POME biofuel blends can substitute fossil diesel use in IC engines.