The Impact of Oil Price Volatility on Statoil

Abstract

PROBLEM STATEMENT How do oil price movements impact Statoil ASA?

RESEARCH QUESTIONS Do oil price fluctuations have an explainable effect on Statoil’s capital expenditures and operating expenditures? Do oil price fluctuations have an explainable effect on Statoil’s share price?

ANALYSIS To analyse the impact of oil price shocks, Ordinary Least Squares regression has been employed for two separate time periods. First, the period from Q4 2001 - Q3 2008 has been studied to examine how Statoil reacted to a positive movement in the oil price. Second, the period from Q3 2014 - Q4 2016 has been studied to examine if Statoil reacted in a different manner to a drop in the oil price.

RESULTS Firstly, the thesis concludes that the oil price has a large effect on Statoil’s share price. The effect was larger in the period 2001 - 2008 when the future risk of the oil price was perceived to be low, than in 2014 - 2016 when the future was highly uncertain and the oil price volatility was high.

Secondly, a significant relationship between the oil price and the investment level was only found in the upturn period from 2001 - 2008. In the period 2014 - 2016 no such relationship was found, however, the reason may be due to the large movement in the NOK/USD exchange rate in this period. If the analysis had been conducted in USD instead of NOK, it is possible that a relationship between the oil price and Statoil’s share price would have been found also in the period 2014 - 2016.

Lastly, no relationship was found between the oil price and Statoil’s operating expenses in any of the time periods. This came as a surprise considering the massive headcount reductions and dramatic cuts in vendor contract prices the media has reported.