Changes Of Oil Price Towards Local Industry Economics Essay

Chapter 1

Introduction

A big organic structure of ascertained literature has suggested that oil monetary value dazes have an of import consequence on economic activity. Refer from Oxford lexicons, oil is a syrupy liquid derived from crude oil, particularly for usage as a fuel or lubricator. The crude oil [ with modifier ] any of assorted syrupy liquids which are indissoluble in H2O but soluble in organic dissolvers and are obtained from animate beings or workss. There are many utilizations of oil which is for aeroplanes, edifice, autos, vesture, detergent, insularity, packaging, pigment, plastic, resort areas, toothbrushes, and toothpaste. If the monetary value of oil additions, it might consequence to all industry and besides market portions in the whole state.

Harmonizing to Basher & A ; Sadorsky ( 2006 ) oil is the lifeblood of modern economic sciences. When states urbanized and overhaul, demand for oil addition. The prediction of oil demand in future is non easy but it can be said that the demand for oil and the industrial development are extremely correlated. As the growing rate addition, the demand for energy ( particularly oil ) increases. In the hereafter, most probablyA ChinaA and India ( these states are called emerging economic systems which are turning really fast ) are expected to demand and devour the most of the universe ‘s oil ( Basher & A ; Sadorsky, 2006 ) .

Energy and more specifically oil is one of the most of import natural stuffs in the modern economic system. Oil merchandises are widely utilised e.g. in transit and power coevals, and oil is besides used in the fabrication of chemical merchandises. Therefore, the monetary value of oil is one of the cardinal monetary values in the international economic system, even more so because it is widely used as mention value for other energy resources.

The monetary value of oil and crude oil merchandises are determined by the international market based on the forces of demand and supply. When there is a big addition in oil monetary values in the universe market, it affects the monetary value of crude oil merchandises across the universe including Malaysia.A

Malayan existent GDP growing is forecast by BMI at 5.5 % for 2007, down from an estimated 5.9 % in 2006. And the undermentioned old ages 7.6 % growing in 2008 decreased to -6.2 % in 2009 and significantly increased to 10.1 % in 2010. State-owned PETRONAS operates in partnership with assorted IOCs under a production sharing system that we believe will ensue in oil production staying around 770,000b/d by 2011. Consumption is forecast to increase by up to 2.5 % per annum to 2011, connoting demand of 545,000b/d by the terminal of the prognosis period. Malaysia ‘s gas exports are set to lift from last twelvemonth ‘s estimated 29bcm to 60bcm, with production surging from 65bcm to 100bcm between 2006 and 2011 study by The Malaysia Oil & A ; Gas Report

In these surveies, we want to place the consequence of oil monetary value to theconstruction, and consumer index which is more related to our surveies. The building sector are besides major user of oil which be extremely effected to the fluctuation of oil monetary value because they have been use oil to develop their undertaking and besides usage of all generator and machine which powered by petrol.The importance of placing the way of causality emanates from its relevancy in national policy-making issues sing energy preservation. Energy preservation issue is more of import when energy Acts of the Apostless as a lending factor in economic growing than when it is used as a consequence of higher economic growing. Furthermore, many economic experts and societal scientists are claiming that the increased demand for energy from developing states like China and India is one of the major grounds for the energy monetary value hikings in recent times.

Since the consumer merchandise is the major consumer demand, it would give impact to the sector while there are alterations in oil monetary value. There is consumer merchandise demand oil to back up their operation such as building.

Problem Statement

Oil monetary values are linked, like those of other trade goods, to the degrees of economic activity in the industrial states. The demands, both from family and industrial users, tends to pick up when growing rates of gross domestic merchandise addition and decelerate down when those growing rates decline. Businesss rely on crude oil merchandises to fuel energy particularly for buildings and the running of machineries for their twenty-four hours to twenty-four hours operations and activities.

The monetary value of rough oil averaged USD79.6 per barrel ( lead ) in 2010, 28.1 % higher compared with that in 2009. Although there is current concern that the rise in monetary value is a accelerating, the fact is that in term of the mean monetary value, the 28.1 % addition was lower than that in 2004 ( 33.8 % ) , 2005 ( 36.7 % ) and 2008 ( 37.8 % ) . The monetary value of rough oil rose to its highest since the 2008 Financial Crisis at USD91.55pb on Jan 3, 2011. It has been on a little retreat recently, but that does non change the strong belief that the monetary value will restart ascents in 2011. The overview of the monetary value of rough oil to average USD90-95pb in 2011, so lifting is up to USD105pb.

When the universe oil monetary values began to increase, the authorities announced that it would hold to reexamine the fuel monetary value subsidy if the universe petroleum oil monetary value hit above USD 100 per barrel. The rough oil monetary value hit USD 94.00 per barrel late 2007. Due to the huge oil monetary value hiking in the universe which affected the Malayan retail fuel monetary values in mid-2008, concerns and companies feared that the monetary value hiking would negatively impact their concerns and the consumers feared that there would be a general addition in monetary values of consumer goods and services.

There is a inquiry that will originate such as whether the oil monetary value will impact the public presentation of the return on the industrial market that will finally interpret the public presentation on the concerns. However, the inquiry remains on how this monetary value motion will impact the market return for several sectors viz. consumer index and building sector. Assorted sentiments had been given by analyst and a deficiency of empirical surveies, so this research will take to reply this inquiry.

Research Objective

To find the consequence of oil monetary value motion towards consumer merchandise sector in Malaysia.

To look into the consequence of planetary oil monetary value motion of the Construction sector in Malaysia.

Research Question

In this survey, there are several research inquiries that have been developed sing the job statement stated. These research inquiries can be:

What is the relationship of oil monetary value motion of the Construction and Consumer merchandise sector in Malaysia? A

What is the impact of oil monetary value to the consumer merchandise stock monetary value in Malaysia?

What is the consequence of oil monetary value motion towards Construction sector in Malaysia?

Significant of The Study

This survey is analyses the consequence of oil monetary value towards the building and consumer merchandise sector in Malaysia. This survey will ensue to the direction of the companies in Malaysia to be wholly prepared for any return of oil monetary value crisis that will impact the universe economic system. The companies may perchance propose their concern theoretical account in readying for the economic volatility. The company may besides hold the readying in doing determination in operation and direction by refer to the other first-class company in the same industry. The accomplishment of every concern depends so much on its strategic program that will convey a successful to the company.

Second, the result of this survey will convey to investing determination devising by investors in taking stock or companies portion on the Malaysian stock exchange during economic recession due to oil monetary value crisis. In add-on, the investor will cognize which company that they must put to do a good return. For organisation in these sectors, it besides can give the chance to the organisation in order to better their investing by taking advantages of the relationship across sectors.

Third, this survey should be good to the research worker. It is of import for the research worker to make this survey because it will assist other UiTM pupils for farther research in this field. Besides that, it does besides lend in footings of research worker cognition in therefore wide country. Furthermore, by making this survey, the research worker will be more concern about the consequence of oil monetary value towards industry in Malaysia. As mentioned before oil represents the most of import macroeconomic factor in the universe economic system. It is one of the chief natural resources that fuel energy in the universe. The findings from this research will assist the hereafter research workers to build their research which in line with this range since the survey besides can be the guideline for their future research and to do the better analysis.

Last but non least, this survey will assist the pupil to understand about the relationship or the consequence of oil monetary values in certain sector in Malaysia. The consequences from this survey besides can be used as informations to do assignments and academic intents.

Scope and Coverage of the Study

This research is focused on analysing the impact of oil monetary value motions on the several sectors in Malaysia. This will be done by analyzing the market indices which are regarded as the index that represents the full group of which it represents. The period covers six old ages which are from 2005 to 2010.

Chapter 2

Literature Review

Introduction

Oil is a factor in production and oil ( or energy ) goods are portion of the human demands. Current and expected fluctuations in the existent oil monetary value may impact both the aggregative demand and supply dealingss in the economic system. There have been legion surveies and treatments on the relationship of macroeconomic factors and its volatility impact on the universe economic system.

Oil Monetary values

Malayan Economis Outlook ( 2008 ) have a drumhead about the Malaysian economic studies which is downswing of economic on last quater of 2008 untill 2009. During the downswing of US market, Malaysia has no direct exposure with US but still effected. Mostly it will consequence on the trade and investing activities.In add-on, this article summarized about the energy ingestion per unit of GDP that has fallen by about 40 % in advanced states since the 1970s, emerging and particularly underdeveloped states are by and large well more energy intensive. This grounds suggests that it is rather natural to anticipate an oil monetary value daze to hold more terrible economic effects in a developing state than in a modern industrialised economic system. In 2009, the consequence of planetary economic system will deeper decelerate down in all major economic sciences. Eventhough there is a minor consequence from the decelerating US economic system, Government have do a alterations to the subsidies and will consequence lifting on the oil prices.This besides will convey an adverse to the inflationary

Raphael Sauter and Shimon Awerbuch ( 2003 ) studied about the relationship of volatility of oil monetary values with the economic activity. Every clip when the monetary values of oil rise, it will impact on the people income and their plus values. Harmonizing to survey, oil monetary value dazes have negative consequence on industrial production and employment and the consequences suggest that a positive oil monetary value daze depresses existent stock returns. In add-on to its effects on the existent economic activity and employment oil monetary value alterations are really of import tools to explicate stock monetary value motions. Furthermore, the volatility of the oil monetary values has been related to the turning of the GDP. The consequence of this survey shows that the oil monetary value volatility has a great impact on the economic system and towards the oil monetary values degree while the volatility will impact labour markets by upseting the rellocative procedure among sectors.

Keith Sill reported that the oil monetary value additions may take to important lag in economic growing. In this article, Keith Sill examines the consequence of alterations in oil monetary values on U.S economic system activity concentrating on how runup ‘s in the monetary value oil can impact the end product growing and rising prices. The alterations of oil monetary value besides consequence the transits cost, heating measures and the monetary values of goods particularly that made with crude oil. As the decision by Keith Sill, there is a dramatic addition in the universe monetary value oil since 1999 and these breaks have been associated with struggle in the Middle East that significantly affected the universe supply of oil.

Consumer Product Sector

Kangni Kpodar has made a survey of consequence of oil monetary value towards the family in Mali. He evaluates the effectivity of the subsidies that protecting the hapless families or non because Mali is one of low-income states with extremely dependent on imported oil merchandise. There is a direct and indirect consequence that the research worker brings to cognize if the higher of oil monetary values will take straight to the family ingestions and their existent income. As the consequence by Kangni Kpodar made is lifting in oil monetary values have a both direct and indirect consequence on families ‘ existent incomes. Its straight affect the household income trough the higher monetary value of oil merchandises they consume and straight raise the monetary values of good produced by other sector.

Construction Sector

IEM article reproduction studies ( 2005 ) have a drumhead about the The Construction Industry Dilemma on Price Fluctuations of Cement & A ; Steel in Malayan economic studies which is downswing of economic on 2004. 2004 was the first clip that the cardinal economic index for the building industry fell despite back-to-back old ages of addition. Another factor for monetary value price reductions and discounts was the complete production and excess of cement from the 2004 building downswing.

The impact of increasing oil monetary values and the 2nd one-fourth cement deficit compounded the monetary value addition. While public building plants have commissariats for lifting fuel monetary values, the private sector building industry have no such luxury and many undertakings feel the added load of increasing fuel monetary values. Steel fabrication, on the other manus, went through similar monetary value fluctuations last twelvemonth. The handiness of natural stuffs was fluctuating, ensuing in volatile monetary values. However, around the same clip that cement monetary values started intensifying, the monetary value of steel had already settled.

In the 3rd one-fourth of 2005, the monetary value of steel is on a recoil from a low RM 700 per metric ton early this twelvemonth for local bit to around RM 800. Steel saloon monetary values are besides authorities controlled, with a cap of RM 1,242 per metric ton. The chief job that plagues the steel industry is the supply and low net income borders. In early 2005 production and end product has been scarce, entering a monthly decrease of around 8 % on norm.

The monetary value of steel is relatively low, scarce supply means that contractors are unable to countervail increasing building costs, with added force per unit areas of cement monetary value within touching distance of the monetary value ceiling and farther increasing fuel monetary values. Many contractors are burdened due to the deficiency of readying for these market fluctuations.

Decision

Although the bulk of past research workers studied the relation of macroeconomic factors including oil monetary values and the economic activity and the general stock market or oil monetary value daze on the returns of selective companies, to day of the month no research have been conducted on the impact of oil monetary value on sector in Malaysia index specifically on building and consumer merchandise sector. The aim of this research is to analyze the impact of planetary petroleum oil monetary values on assorted sectors in Malaysia which aims to go developed states by the twelvemonth 2020.

Hypothesis

From these theoretical findings, two hypotheses are deduced:

Hypothesis 1

H0: Construction sector public presentation is negatively related to the alterations of oil monetary value in the market.

H1: Construction sector public presentation is positively related to alterations of oil monetary value in the market.

Hypothesis 2

H0: Consumer merchandise sector public presentation is negatively related to the alterations of oil monetary value in the market.

H1: Consumer merchandise sector public presentation is positively related to alterations of oil monetary value in the market.

Chapter 3

Research Methodology

Introduction

In this chapter, farther accounts are given to supply detoails on the research methodological analysis, which comprises the methods that will be used in this research to accomplish the aim of this survey. In this research we shall analyze the impact of oil monetary values alterations in the market to local industry which is building and consumer merchandise sector.

Data Collection Method

Variables

Beginnings

Consumer Goods Price Index

Thomas One Banker Data Stream

Construction Price Index

Thomas One Banker Data Stream

Oil and Gas Price Index

Thomas One Banker Data Stream

Table 1.0

Data aggregation method trades with gather the needed informations from the units of the survey. In this survey the informations are gathered through secondary informations. Table 1.0 shows that the Data for all the variables that we us collected from Thomas One Banker Data Stream.

There are assorted printed resources and published studies on the issue were looked into before analysing the information in inside informations.

This survey used monthly close index from 2001 to 2011, obtained from Thomas One Banker. The period of this survey was calculated utilizing monthly informations from 2001 to 20011. The day of the month included in this survey is merely the day of the month when all stock and oil markets studied are chosen or being selected. In this survey, merely three variables are being used.A The variables that we focus are oil monetary value, consumer merchandise and building sector index.

Research Design

This research is to seek and supply an account between two or more phenomena. Explanatory research characteristically seeks to acknowledge and clear up a causal association which is substantively important and meaningful. In this kind of survey, the research worker was develop or construct up hypotheses, which is to be tested an experienced in the visible radiation of the bing literature and after that observe whether the informations the research worker have composed and collected can either be called on to back up or confute those hypotheses.

The information in this survey will be analyze utilizing arrested development analysis. Arrested development analysis is a statistical technique that can be used to try and set up a functional relationship between the dependant and independent variables in arrested development analysis.

Multi Regression Model

Where ;

Y = Dependent variable which represent oil monetary value index

= The changeless figure of equation

= Coefficient Beta value represent the T-Bill rate in Malaya

= Independent variable which represent consumer merchandise Index

= Independent variable which represent building Index

= Mistake

There is if the a‰? 0aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦ .

If the = 0aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦ .

If the a‰¤ 0aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦ .

P & lt ; 0.05aˆ¦aˆ¦ .

Coefficient of Determination ( R2 )

In appraisal and reading of consequences, of import statistics that need to be considered is coefficient of finding. Coefficient of finding ( R2 ) measures how many per centum of a alteration in the dependent variable can be measured or explained by the alteration in the independent variables. The value of R2 is scope from 0 – 1.

If R2 = 0, this means none of the alteration in the dependent variable can be measured or explained by the alteration in the independent variables. The estimated equation is useless ( incorrect picks of variables ) .

If R2 = 1, this means 100 % of the alteration in the dependent variable can be explained by the alteration in the independent variables ( perfect instance ) . The equation has full explanatory power.

R2 can be measured by:

R2 = Total Explain Variation

Entire fluctuation

Normally, the higher the value of R2, the higher the explanatory power of the estimated equation and the more accurate for calculating intents.

Durbin Watson

D.W trial is usage to find the auto-correlation in the map. Auto-correlation can originate from bing the tendency and rhythm in economic variable, from the exclusion of of import variable from non-linearity of the information. In general, if D.W test below 2 agencies that the map has auto-correlation job and if above 2 agencies that the map does non has auto-correlation job.

F-Statistic

F-statistic is used to prove the hypothesis that the fluctuation in the independent variable explained a important part of the fluctuation in the dependant variable. In other words, it s used to prove the significance of the overall theoretical account.

F-statistic can be calculated as follows:

F = R2 / ( k-1 ) A­A­A­____

( 1-R2 ) / ( n-k )

Where:

F = critical value

K = figure of independent variables

n = figure of twelvemonth

Rule of pollex & gt ; 3

If the deliberate F-value is higher than F-distribution tabular array, there is a important relationship between the dependant variable and independent variable.

Calculated F-value & gt ; F-distribution tabular array

If the deliberate F-value is lower than F-distribution tabular array, there is undistinguished relationship between the dependant variable and independent variable.

Calculated F-value & lt ; F-distribution tabular array.

Decision

This chapter is about the informations method analysis and theoretical account specification used to gauge the relationship between alterations of oil monetary value with building and consumer industry. Besides wining the survey, this chapter besides provides research design and proving for this survey.

Restrictions Of survey

First, the clip frame of this research is short.A It seems to be the biggest restraint as this paper to be completed within 4 month. Time restraint limits the research to garner, hunt and analyse the information in order to finish the survey.

Beside that the research worker is lack of experience in carry oning the research. So the research worker asks the advisor to assist in certain countries in order to finish the undertaking. This gives the new experience and tonss of cognition while carry oning this research.

Chapter 4

Finding and Data Analysis

Data has been import from the informations watercourse of Thomas One Banker from Library Tun Abdul Razak 2 at UiTM Shah Alam. Data has been gathered are oil monetary value, consumer index and building and stuff index from April 2001 until March 2011.

a?† = ( P1 – P0 )

P0 All the information has been clean by convert it to the alterations which utilizing this expression:

Data has been analyzed utilizing the Eviews package version 5, all informations aggregation has been drag into package as worksheet. The expression which we use in our method of research has been fill in the equation to happen the consequence for our thesis. The consequence we get from Eviews will be interpret to reply the hypothesis.

If the consequence is non answered, we will propose to farther analysis.

Descriptive Statistic

Statistic

OPI

Curie

COI

Mean

0.007298

0.012871

0.010425

Median

0.0073

0.01455

0.00335

Maximum

0.2308

0.2229

0.2039

Minimum

-0.7548

-0.1161

-0.2449

Std. Dev.

0.084835

0.057917

0.081068

Lopsidedness

-5.856201

0.343618

-0.010186

Kurtosis

55.99528

4.041787

3.184425

A

A

A

A

Jarque-Bera

14728.4

7.788064

0.172138

Probability

0.00000

0.020363

0.917531

ObservationsA A A

Notes:

*** Significant at the 1 % degree

** Significant at the 5 % degree

* Significant at the 10 % degree

Table 1.1

Descriptive statistic such as mean, average, standard divergence and discrepancy were obtained for interval-scaled independent and dependent variables. Descriptive statistic in the Table 1.1 below shows the mean, average and standard divergence of the dependant and independent variables of this survey. Mean is the mean value of series that obtained by adding up the series and dividing by the figure of observations. Median is the in-between value of the series when the values are ordered from the smallest to the largest. The median is a robust step of the Centre of the distribution that is less sensitive to outliers than the mean. It is of import to observe that standard divergence is a major of scattering or spread in the series. The standard divergence is given by:

Where N is the figure of observation in the current sample and is the mean of series.

Correlation

Coefficient of Correlation ( R ) is used to find the degree of relationship between a dependent variable and the independent variables. The value of the correlativity analysis is ranged between -1 ( perfect negative correlativity ) to +1 ( perfect positive correlativity ) .

The consequences of correlativity for Oil Price Index with Construction and Materials and Consumer Index

OPI

Curie

COI

OPI

1.000000

0.209748

0.154282

Curie

0.209748

1.000000

0.704439

COI

0.154282

0.704439

1.000000

Table 1.2

Correlation analysis is step of the relationship between variable. There is shown both of the variable is the positive relationship, it mean the variables is move in the same way, they are positively correlated. Construction and stuffs index and oil monetary value index has 0.154 correlativities. It means little, about negligible relationship. The consumer index and oil monetary value index is 0.209, this mean there is a low correlativity, definite but little relationship between oil monetary value and consumer index.

From this correlativity consequence, it can be answered the research inquiry no 1 that consumer sector and building sector has a positive relationship with the oil monetary value alterations.

In order respond the hypothesis, since the building and stuff index has positive correlativity, H0 has been rejected, and H1 which is building sector public presentation is positively related to alterations of oil monetary value is accepted. And since the consumer index has positive correlativity, H0 is strongly rejected, and H1 which is consumer merchandise sector public presentation is positively related to alterations of oil monetary value in the market is accepted.

Unit Root Test

The information series has been analyzed is stationary informations. Since we have run the Eviews, we are utilizing the first different informations which is alterations of monthly informations series. Since the information is non suffered by unit root trial, we proceed with arrested development analysis.

Arrested development Analysis

Dependent Variable: OPI

Method: Least Squares

Variable

Coefficient

Std. Mistake

t-Statistic

Prob.A A

C

0.337473

0.782980

0.431010

0.6673

Curie

0.293862

0.186540

1.575327

0.1179

COI

0.013559

0.133268

0.101745

0.9191

R-squared

0.044079

A A A A Mean dependant volt-ampere

0.729833

Adjusted R-squared

0.027738

A A A A S.D. dependant volt-ampere

8.483462

S.E. of arrested development

8.364976

A A A A Akaike info standard

7.110666

Sum squared resid

8186.821

A A A A Schwarz standard

7.180354

Log likeliness

-423.6400

A A A A F-statistic

2.697513

Durbin-Watson stat

2.204651

A A A A Prob ( F-statistic )

0.071564

Table 1.3Regression analysis consequence

Multiple Regression Analysis technique was applied in order to analyze the relationship between the dependant variable and independent variables

Coefficient of Determination ( R2 ) is used to find how good the arrested development fits the information. The aim is to prove the goodness of fit.From the tabular array 1.3 above, R-squared is 4.41 % of the dependant variable ( OPI ) can be explained by the independent variables ( CI and COI ) . This indicates that the R-squared is far to 100 % . So, the theoretical account is non fit

The staying 95.59 % can non be explained by this arrested development analysis. The factor might be due to other of import independent variables which are non being included in this survey. Therefore, the arrested development equation is non acceptable because the dependent variables ( OPI ) ca n’t be explained by the independent variables ( CI and COI ) .

Adjusted R-squared is a criterion, arbitrary downward accommodation to punish for the possibility that, with many mugwumps, some of the discrepancy may be due to opportunity. More the independent variables will be more the accommodation punishment. Since there are merely two independent variables here, the punishment is minor.

Durbin Watson consequence in this analysis is 2.2046. Since the Durbin Watson is 2.2046 & gt ; 2, it means there is no auto-correlation in the map can originate from bing the tendency and rhythm in economic variable, from the exclusion of of import variable from non-linearity of the informations.

F-Test is used to prove the hypothesis that the fluctuation in the independent variables explained a important part of the fluctuation in the dependent variables. The F-test is an overall trial. F-statistic consequence in the arrested development end product is 2.6975. Since the p-value given, denoted Prob ( F-statistic ) is 0.07 & gt ; 0.05, so we reject the void hypothesis that all of the arrested development coefficients are zero. It mean the variable which been used in this arrested development is non important

Chapter 5

Decision

This research attempts to analyse the consequence of oil monetary values towards the industry in Malaysia which is consumer merchandise sector and building sector. Beside, this survey besides tries to detect and analyse the consequence relationship between dependant variable and independent variable for 10 old ages which is from 2001 until 2011.

The analysis has been done with the three variables which are OPI, CI and COI have a positive mean and besides positive criterion divergence. The correlativity among variable besides positively correlated about somewhat important. The variable is non suffer from unit root trial, therefore the analysis has been keep on with the arrested development analysis.

Multiple Regression Analysis technique was applied in order to analyze the relationship between dependent variables and independent variable. Based on the arrested development consequences, there is shown the positive relationship, it mean the variables is move in the same way, they are positively and extremely correlated. For building and stuffs index and oil monetary value index has show undistinguished relationship. Whereas the consumer index and oil monetary value index has show a low correlativity or little relationship between them. From the consequence, it can be answered the research inquiry no 1 that consumer sector and building sector has a positive relationship with the oil monetary value alterations. In order respond the hypothesis, since the building and stuff index has positive correlativity, H0 has been rejected, and H1 which is building sector public presentation is positively related to alterations of oil monetary value is accepted. And since the consumer index has positive correlativity, H0 is strongly rejected, and H1 which is consumer merchandise sector public presentation is positively related to alterations of oil monetary value in the market is accepted.

Consequence from the R-Squared has showed that the dependant variable is non explained the independent variables. Therefore, the arrested development equation is non acceptable. This may reply the research inquiry 2 which the variables are merely 4.41 % impact by the alterations of oil monetary value. Durbin Watson has shown there is no car correlativity since we are use the consecutive monthly indexes informations. F-test has been shown there are undistinguished relationship since the deliberate F-Value is lower than the F-distribution.

As decision, factor might be due to the other of import independent variable are non included in this survey.

Recommendation

Since the consequence for our analysis is somewhat important where there is merely 4.41 % consequence to oil monetary value alterations, we recommend that Malaysia should make more research and development to happen other replacement merchandise which can replace the oil. Nowadays the oil is the chief beginnings of energy for motor vehicle, particularly machinery and transit. Recently, there are biofuel, solar energy, and natural gas energy can be replacing the oil. But there is non widely usage because the authorities non encourages the Malayan to utilize that. Therefore, we are proposing that authorities must take an action to back up the replacement merchandise to replace the oil to avoid the market sector merely depending on one beginning of energy.

Other than that, we are proposing for the building sector to import the steel and cement from the other state like Chinas and Kenya. Ask we know, china is the chief exporter for steel because of the cheapest monetary value. Up to 620 million metric tons in 2010, China has exported to other state. For the cement, we besides recommend to import from other state such as Kenya and East Africa.

And in conclusion for consumer merchandise sector, we recommend that those who in the sector must be profoundly study with the economic activity and besides update to be ware with the economic downswing every bit same as oil monetary value addition. They besides must hold the program B to maintain earn net income during the event. This sector are non truly acquire the important impact from the alterations of oil monetary value because, this sector are really of import to Malayan and universe for their life. They are still traveling even though the economic recession.

Mention

Beginnings by U.S Energy Information Administration

Malayan Economic Outlook-Meo 3q 2008

Gross domestic rate 2008 – 2010. “ Department of Statistic Malaysia ”

State Master web page, All CIA World Factbooks 18 December 2003 to 18 December 2008

Basher, S.A. and Sadorsky, P. , ( 2006 ) . “ Oil monetary value hazard and emerging stock markets. ” Global Finance Journal, 17, 224-251.

KangniKpodar ( 2006 ) , Distributional Effects of Oil Price Changes on Household Outgos: Evidence from Mali

Raphael Sauter and Shimon Awerbuch, Ph.D. , Oil Price Volatility And Economic Activity: A Survey And Literature Review, IEA Research Paper.

Deloitte: Global Powers of the consumer merchandises industry 2010 ‘Extracting value ‘

Keith Sill ( 2007 ) , The Macroeconomicss of Oil Dazes: Business Review

Mark Mahorney, The Consumer Price Index: A Friend To Investor