Volume 21

Dr Tie Xu Hongkong Baptist University Hongkong DOI:https://doi.org/10.65281/741827 Introduction Since the beginning of the current decade of the third millennium, the world has experienced a series of health, political, and economic events and phenomena that have had significant repercussions on oil prices. Oil occupies a strategic position in the international economy, as it is considered a valuable commodity due to its scarcity and finite nature, which affects its supply by producing countries. Russia is among the largest producers of this commodity, ranking third after the United States and Saudi Arabia, with approximately seven million barrels of oil and petroleum products produced daily. Russia’s involvement in the war with Ukraine had a substantial impact on oil prices. The world witnessed an unprecedented surge in oil prices, unseen for the past fourteen years, with prices reaching nearly USD 140 per barrel, compared to around USD 77 per barrel in December 2021. Although this situation appears beneficial for oil-producing countries such as Algeria, it may discourage the attraction of foreign capital by creating reliance on the currently high oil revenues. Conversely, Algeria may exploit the price differential in oil markets by granting tax and financial incentives to attract international capital and achieve strategic objectives. Research Problem In light of the foregoing, the research problem can be formulated as follows: To what extent do fluctuations in oil prices affect international capital flows? Sub-questions The following sub-questions stem from the main problem: Research Hypotheses Based on the research problem, sub-questions, and previous studies, the following hypotheses are proposed: Previous Studies Qanouni and Amer (2019): “International Capital Flows and Economic Growth in Algeria: An Empirical Study (1990–2018)” This study aimed to investigate the relationship between international capital flows in their various forms and economic growth in Algeria during the period 1990–2018. The researchers adopted a descriptive-analytical approach to describe and analyze concepts related to international capital flows and economic growth. They also employed a quantitative econometric approach to assess the impact of capital flows on economic growth using the Autoregressive Distributed Lag (ARDL) model. The findings revealed the existence of a long-run relationship between foreign direct investment, migrants’ remittances, external debt, foreign aid, and economic growth, with varying effects in the short and long run. The study concluded that Algeria needs deep reforms to attract more foreign capital, particularly through creating a favorable environment that would enable these flows to contribute effectively to economic growth. Ahlam (2013): “The Impact of Changes in Foreign Exchange Reserve Currency Values on Capital Flows: The Case of Algeria” This study examined the effect of changes in the value of reserve currencies on capital flows in Algeria using available data. It relied on the historical approach to trace the evolution of capital flows, the descriptive approach to describe phenomena, the analytical approach to analyze tables and statistics, the comparative approach to compare the exchange rates of the euro, the U.S. dollar, and the Algerian dinar, and econometric methods to estimate and model the data. The study concluded that an increase in the value of reserve currencies leads to an increase in the balance of capital flows in Algeria, and vice versa. It also found that the euro has become the currency exerting the greatest influence on capital flows in Algeria in recent years (since 2007), replacing the U.S. dollar. Chachoua, Saadaoui, and Amouri (2020): “Impact de la Loi 51%-49% sur l’Attraction de l’Investissement Direct Étranger” This study investigated the impact of the Algerian government’s adoption of the 49%-51% rule in 2009 on foreign direct investment inflows by analyzing FDI data in Algeria for the period 2005–2015 obtained from the World Bank database. The study employed descriptive and analytical methods. The results showed that the implementation of this law, in the context of the global economic crisis, had a negative impact on foreign direct investment inflows and constituted an obstacle to the development of FDI in Algeria. Moreover, foreign investors tended to redirect their investments toward neighboring countries that offered a more favorable business climate. Chapter One: Theoretical Foundations of the Study Variables Section One: Oil Prices First: Definition of Oil Price The oil price refers to the monetary value assigned to petroleum products during a specific period as a result of the interaction of several economic, social, political, and climatic factors, in addition to the prevailing market structure. From this definition, it can be inferred that the oil price is determined by the following components: Second: Types of Oil Prices Oil prices can be classified into the following categories: 1. Posted Price The posted price emerged in the United States in 1830, when oil companies assumed responsibility for announcing prices at production wells immediately after purchasing crude oil from producers. With the expansion of production areas outside the United States, the pricing process shifted from wells to export ports. 2. Official Price The official price appeared in 1880 when crude oil transactions were conducted at the wellhead. Oil companies announced their prices and reinforced them with discounts, giving rise to price competition. Some economists argue that the official price is determined by the value of refined petroleum products in a competitive final consumption market. Consequently, any change in derived demand directly affects the spot price of crude oil, which in turn influences the official price. 3. Spot Price Also referred to as the free-market price, the spot price is determined according to market forces of supply and demand. It emerged through the development of the spot market by major oil companies. This market represents a short-term free market in which crude oil is traded outside long-term contracts between producing countries and foreign companies. 4. Reference Price Oil-producing countries use the reference price to support their revenues. It is generally lower than the posted price but higher than the actual market price. The reference price is calculated based on the official and spot prices over several years. 5. Realized Price With the emergence of new oil companies that offered various discounts and favorable commercial conditions to buyers, state-owned oil companies adopted