Measuring global oil trade dependencies: An application of the point-wise mutual information method. (January 2016)

• Record Type: Journal Article
• Authors: Kharrazi, Ali; Fath, Brian D.
• Is Part Of: Energy policy. Volume 88(2016)
• Page Start: 271
• Page End: 277
• Publication Date: 2016-01
• Subjects: Trade dependency -- Point-wise mutual information -- Crude oil trade -- Network analysis -- Energy policy; Energy policy -- Periodicals; Politique énergétique -- Périodiques; Electronic journals; 333.79
• DOI: 10.1016/j.enpol.2015.10.017
• Languages: English
• ISSNs: 0301-4215

Abstract

Abstract: Oil trade is one of the most vital networks in the global economy. In this paper, we analyze the 1998–2012 oil trade networks using the point-wise mutual information (PMI) method and determine the pairwise trade preferences and dependencies. Using examples of the USA's trade partners, this research demonstrates the usefulness of the PMI method as an additional methodological tool to evaluate the outcomes from countries' decisions to engage in preferred trading partners. A positive PMI value indicates trade preference where trade is larger than would be expected. For example, in 2012 the USA imported 2, 548.7 kbpd despite an expected 358.5 kbpd of oil from Canada. Conversely, a negative PMI value indicates trade dis-preference where the amount of trade is smaller than what would be expected. For example, the 15-year average of annual PMI between Saudi Arabia and the U.S.A. is −0.130 and between Russia and the USA −1.596. We reflect the three primary reasons of discrepancies between actual and neutral model trade can be related to position, price, and politics. The PMI can quantify the political success or failure of trade preferences and can more accurately account temporal variation of interdependencies. Highlights: We analyzed global oil trade networks using the point-wise mutual information method. We identified position, price, & politics as drivers of oil trade preference. The PMI method is useful in research on complex trade networks and dependency theory. A time-series analysis of PMI can track dependencies & evaluate policy decisions.