| 摘要 |
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1. Research Purpose
In 2009, approximately 84% of primary energy consumption in Korea was composed of fossil fuels such as oil, natural gas, and coal. Moreover, because the Korean economy have entirely imported all of fossil fuels, fluctuations of international prices of fossil fuels have seriously affected not only economic performances, but also formation of energy policy.
In fact, as fossil fuels are highly correlated with each other, the fluctuations of international prices of fossil fuels can be decomposed into two components: a common and idiosyncratic part. Therefore, employing Markowitz's mean-variance model, we are able to interpret the common part of the fluctuations of international prices of fossil fuels as the market risk which all fossil fuels are confronted with. On the other hand, the idiosyncratic part can be thought as the idiosyncratic risk which comes from peculiar and specific market conditions of each fossil fuel. As a result, the idiosyncratic risk of the fluctuations of the international price of each fossil fuel could be minimized by properly constructing a portfolio of the fossil fuel consumption. Thus, decomposing the fluctuations of international prices of fossil fuels into these two parts and employing the portfolio selection theory make it possible to construct an optimal fossil energy consumption portfolio which minimize risks of a return from energy consumption, given each return level.
The main purpose of our study is to construct this hypothetical energy consumption portfolio, based on the modern financial theory. This optimal energy consumption portfolio might be used as a reference to evaluate the current energy consumption structure and to rebuild energy policy.
2. Summary
In constructing the optimal energy consumption portfolio, we define returns on fossil fuel consumption as TOE (Ton of Oil Equivalent) per 1 cent. In general, as the calorie unit for TOE of each fossil fuel is not altered, fluctuations of the growth rate of returns on each fossil fuel consumption presented by the TOE unit mainly is due to the fluctuations of the international price of each fossil fuel. Hence, the optimal fossil fuel consumption portfolio to minimize variations of the growth rates of returns is same to the fossil fuel consumption portfolio to minimize variations of the growth rates of international prices of fossil fuels.
To construct the optimal fossil fuel consumption portfolio, first we decompose the growth rates of returns into two parts, the common and idiosyncratic part, using the dynamic latent common factor model. Then, based on the dominance principle indicated by the mean-variance model, we construct the efficient frontier of fossil fuel consumption portfolio. Meanwhile, before building the efficient frontier, we empirically investigate how the common part of the growth rates of returns on fossil fuel consumption react to certain structural shocks to global economic conditions, employing a SVAR (Structural Vector Autoregression Model). Thus, we identify two structural shocks, aggregate demand and supply shocks in the global economy, and then, estimate the impulse response functions of the common part.
Our finding is that in response to shocks to increase aggregate demand, the common part of the growth rates of returns rises. It means that shocks to increase the aggregate demand in the global economy increase international prices of the fossil fuels. However, the common part declines in response to shocks to increase total factor productivity of the global economy. It means that since a rise in total factor productivity increases the marginal product of fossil fuels, the shocks to total factor productivity decreases the growth rates of returns on fossil fuels.
The optimal fossil fuel consumption portfolio, which has the smallest risk of the growth rates of returns, on the efficient frontier implied by the mean-variance model is consisted of the following consumption combination of fossil fuels : 26.5% of oil, 45.8% of natural gas and 27.7% of coal. Furthermore, based on the portfolios of fossil fuel consumption on the effective frontier, the actual fossil fuel consumption portfolio of the Korean economy in 2009 seems to be somewhat inefficient.
3. Research Results and Policy Implications
In our study, it has been turned out that oil is the primary factor to deteriorate returns on the fossil fuel consumption portfolio and to increase variations of the returns. This result is in line with the recent studies which indicate decreasing dependency on oil consumption alleviates the effects of oil shocks on the economy. Therefore, our results show that it is crucial to change the current energy consumption structure by substituting other energy resources for oil, in order to improve returns on the fossil fuel consumption portfolio. In addition, it is also important to develop more efficient energy technology and improve total factor productivity.
One limitation of our study is that we only consider the calorie unit for TOE to calculate returns on fossil fuel consumption. However, as fossil fuels considered in our study usually emit greenhouse gases, they cause social costs, causing air pollution. Thus, it is important to include these socal costs in calculating returns on the fossil fuel consumption. We leave this task for our future research.
Language : Korean |
