The determinants of Greece's export supply of oil

In the last fifteen years or so Greece has emerged as an important exporter of refined oil products, which led to an increase of its share in total world exports as well as to the improvement of the country’s oil balance and overall current account. This paper presents an empirical investigation of the factors that determine Greece’s oil export supply contributing to the improvement of the country’s export performance. The analysis focuses on the supply side considering the traditional specification of the imperfect substitute model by Goldstein and Khan, which is augmented by introducing the role of investment in the sector. The empirical estimation involves the cointegration methodology, distinguishing between long-run and short-run effects. The findings show that there exist significant stable cointegrating relationships across the traditional and the augmented specifications as well as short-run effects. Investment activity by the oil companies has been an enhancing factor of the sector’s exports, revealing itself in linear and non-linear form. Furthermore, significant long-run and short-run effects stem from domestic demand and the refining margin. In particular, the negative effect of domestic demand reflects primarily the impact of the recession on oil exports. That is, falling domestic demand necessitates the channelling of excess supply to external markets, thereby mitigating the adverse effects of the recession.