The Dynamic Effects of Crude Oil and Natural Gas Prices on Iran's Methanol

Petroleum and petrochemicals prices movements have always been at the core of economic research agenda not only because of its crucial effect on the cash flows of oil-related businesses, but also due to the far-reaching implications of oil price uncertainty on the macro-economy and the financial markets. It is not surprising therefore that in the energy economics literature there is a plethora of empirical studies examining the issue of modeling movements and risk management. As a case study, this paper investigates the dynamic relationship between Iran’s crude oil price, natural gas price and methanol price which is one of the most important non-oil exports of the oil-exporting country. To do so, the weekly data from first week of 2005:1 to the third week 2013:5 in a VECM framework is applied. The results show that in the long-run, oil and gas prices hikes leads to proportional increase in methanol price while in the short-run, this impact is not significant