Renewable Energy Sub-sector Indices And Crude Oil Futures Prices

As an important resource with both commodity and financial attributes in today’s world,the significant impact of crude oil price changes on the economy and the resulting environmental problems have triggered the concern and development of renewable energy in countries around the world.Especially since the trade conflict between China and the United States,energy security as the focus of the game of major powers has once again aroused the attention of governments,entrepreneurs and investors to the link between renewable energy and crude oil.As China continues to promote the development of renewable energy,the country’s renewable energy industry has shifted from being driven by government subsidies to an autonomous development model in which technological advances lead to lower costs and higher profits,attracting a large number of entrepreneurs and investors to participate.At the same time,the widespread popularity of new energy vehicles has gradually reduced the application of crude oil in the field of transportation.And the link between financial markets makes the correlation between international crude oil price and possible renewable energy stock market increasingly close.This paper explores whether there is a correlation between international oil prices and the renewable energy stock market and the strength of the correlation from the characteristics of their own energy development in each sub-sector of renewable energy(water energy,wind energy and solar energy)and their different positioning in energy supply,which is of great significance to industry policy makers,relevant corporate management and investors.This paper on the basis of the micro-decision theory of consumers and producers and the theory of inter-market correlations,the causal relationships between the corresponding stock market indices and international crude oil futures prices were studied separately for the period from September 2010 to September 2021 using the bootstrap rolling window causality test.At the same time,a new energy vehicle stock index is added to explore the link between their stock markets and crude oil prices in the context of the growing popularity of new energy vehicles.The correlation test results show that the correlation between hydropower,wind power and solar industry indices is not significant,but there is some correlation between the new energy vehicle index and wind power index and solar index,which proves that the conclusion of using the overall index of renewable energy industry to study the relationship between renewable energy stock market and crude oil price is not reliable;after that,the full-sample causality test is conducted for each group,and it is find that the causal relationship between each sub-sector index and oil price is not consistent;The results of the parameter test indicate that due to the different characteristics of each renewable energy sub-sector,the causal relationships between crude oil prices and various renewable energy indices show different results and have time-varying characteristics.In particular,the time interval and direction of the causal relationship between crude oil prices and various indices are not consistent.By analyzing the influence mechanism,this paper finds that: with the continuous development of hydropower in China,the interaction between the hydropower index and the oil price is concentrated when the incoming water is larger than expected(2018M11-2020M04).And with the rising scale of wind power and decreasing cost of wind power,the wind power index has a negative impact on oil prices during 2020M02-2021M09,which is of course related to the overall decline in energy demand due to the COVID-19 epidemic.Solar and new energy vehicles,on the other hand,with their relatively low penetration and relatively high costs,are more likely to interact with crude oil futures prices during periods of high oil prices(up to$100/barrel during 2014M02-0214M06)and low oil prices(as low as $31/barrel in 2016).These findings have important implications for policymakers and investors,and we therefore recommend that: first,the heterogeneity of the impact of oil prices on various renewable energy industries requires policymakers to designate different policies for different industries to deal with oil shocks.For example,when oil prices are high,subsidies for photovoltaic power generation or grid-connected electricity prices should be increased to speed up the transformation of the energy structure.At the same time,policy formulation should take into account the different energy endowments available in various regions to prevent insufficient energy supply caused by a one-size-fits-all policy.Policy makers also should increase policy support for new energy vehicles,improve the supporting facilities and further increase the penetration rate of new energy vehicles.