The relationship between oil prices and energy sector stocks in the global recession issue

Changes in world oil prices as a result of global issues have had a certain impact on the capital market in Indonesia. This study aims to examine the relationship between stock prices in the energy sector and fluctuations in world oil prices. Observations were made from January to April 2023 with a sample of 76 firms in the energy sector. The result of the analysis shows that stock prices in the energy sector have high variability throughout the observation period. In addition, this study finds that energy sector stock prices have a positive relationship with world oil prices.


Introduction
Crude oil and the industrial sector are often associated with issues of global economic change because crude oil is the main driver of the industry (Nizar, 2012;Kusuma, 2014). In general, changes in unfavorable global economic conditions tend to result in a decline in demand for crude oil if there is efficiency in production and consumption activities in various industrial sectors. Conversely, stable global economic conditions tend to increase demand for crude oil from various industrial sectors.
Recently, the Republic of Indonesia is faced with the issue of a global recession that has occurred since 2020 due to the COVID-19 pandemic and will continue into 2023. In particular, the energy sector in Indonesia is an important sector that cannot be separated from the impact of global economic issues. Figure 1 shows that the energy sector market index tends to decline from January to April 2023.
Empirically, Antonius (2019) finds that increasing oil prices will have a varied impact on the market index for each type of industry. However, Pagora et al. (2023) report that increases in oil prices tend to be followed by increases in the market index. Specifically, Tanod et al. (2022) and Ari et al. (2023) find that an increase in world oil prices tends to be followed by an increase in the market index for the energy sector. Based on this phenomenon, the purpose of this study is to examine the relationship between world oil prices and stock prices of issuers that are included in the industrial sector in Indonesia. Specifically, Suryajaya and Kurnia (2019) prove that an increase in oil prices has a significant positive impact on the property sector market index. Firmansyah et al. (2022) find that rising world oil prices had a significant positive impact on stock returns in mining sector companies. Ekadjaja and Rorlen (2023) also find that the increase in crude oil prices had a significant positive effect on the performance of the energy sector index.
Conversely, Noval (2022) proves that the price of crude oil has no significant effect on the Islamic stock market in Indonesia. Consistently, Suradi and Marisa (2020), and Prasada and Pangestuti (2022) also prove that oil prices do not significantly affect the stock market index in Indonesia. In addition, Wulan et al. (2023) show that rising oil prices tend to be followed by a decline in the stock market index in Indonesia. Based on this review, the hypothesis of this study is noted as follows. Ha: the oil price and shares in the energy sector has a significant relationship

Research method
In accordance with the objectives of this study, the data used are stock prices from the energy sector and the crude oil prices. The sample chosen is 76 listed firms with an observation period from 1 January 2023 to 28 April 2023. In order to test the hypothesis, this study carried out the following steps of analysis. First, the correlation test is conducted to test the relationship between stock prices and the crude oil prices. The formula for correlation test is as follows.
Second, this study calculates the coefficient of variation (CV) to evaluate the volatility of stock prices from the energy sector. This study expects low CV (or less than 1) for stock prices from the energy sector. The formula of CV is follows.  Table 1 presents descriptive statistics of prices for the energy sector and crude oil. The average stock price of the energy sector during the observation period is IDR 2151.70, while crude oil is USD 76.85. The standard deviation (SD) implies that stock prices in the energy sector tend to be more volatile than crude oil prices. In addition, the positive skewness of stock prices in the energy sector implies that the The Contrarian: Finance, Accounting, and Business Research Volume 2, Issue 2, 2023 pp. 36-40 sector is dominated by relatively low prices during the January to April compared to crude oil. However, prices in the energy sector and crude oil also show a CV greater than 1 which indicates high variability. Furthermore, the normality test is conducted for prices of energy sector and crude oil. Figure 1 shows that the prices for energy sector are not at normal distribution while the prices of crude oil are at normal distribution. Based on those results, this study conducts non-parametric correlation test (or Kendall's tau). Table 2 shows that the stock prices of the energy sector have a significant and positive weak relationship with crude oil. This finding implies that the increase in share prices from the energy sector tends to be in the same direction as the increase in crude oil prices. The result of this study is consistent with the findings from Suryajaya and Kurnia (2019), Firmansyah et al. (2022), and Ekadjaja and Rorlen (2023. On the contrary, the result of this study is inconsistent with Suradi andMarisa (2020), Noval (2022), Prasada and Pangestuti (2022), and Wulan et al. (2023).

Conclusion
Several global issues such as the COVID-19 pandemic, inflation, and world geopolitical changes are economic events that have an impact on world oil prices and the capital market. The energy sector is one of the important sectors in economic growth in Indonesia which is also affected by fluctuations in world oil prices. This study shows that share prices from the energy sector have high variability from January to April 2023. This study also proves that share prices in the energy sector have a positive correlation with world oil prices. This finding implies that there is a unidirectional relationship between the share price of the energy sector and the price of world oil.