How do political tensions and geopolitical risks impact oil prices?

Valérie Mignon () and Jamel Saadaoui

Energy Economics, 2024, vol. 129, issue C

Abstract: This paper assesses the effect of US–China political relationships and geopolitical risks on oil prices. To this end, we consider two quantitative measures, the Political Relationship Index (PRI) and the Geopolitical Risk Index (GPR), and rely on structural VAR and local projection methodologies. Our findings show that improved US–China relationships, as well as higher geopolitical risks, drive up the price of oil. In fact, unexpected shocks in the political relationship index are associated with optimistic expectations of economic activity, whereas unexpected shocks in the geopolitical risk index also reflect fears of supply disruption. Political tensions and geopolitical risks are thus complementary causal drivers of oil prices, the former being linked to consumer expectations and the latter to the prospects of aggregate markets.

Keywords: Oil prices; Political relationships; Geopolitical risk; China (search for similar items in EconPapers)
JEL-codes: C32 F51 Q4 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S014098832300717X
Full text for ScienceDirect subscribers only

Related works:
Working Paper: How Do Political Tensions and Geopolitical Risks Impact Oil Prices? (2024)
Working Paper: How Do Political Tensions and Geopolitical Risks Impact Oil Prices? (2023)
Working Paper: How Do Political Tensions and Geopolitical Risks Impact Oil Prices? (2023)
Working Paper: How Do Political Tensions and Geopolitical Risks Impact Oil Prices? (2023)
Working Paper: How political tensions and geopolitical risks impact oil prices? (2023)
Working Paper: How Political Tensions and Geopolitical Risks Impact Oil Prices? (2023)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:129:y:2024:i:c:s014098832300717x

DOI: 10.1016/j.eneco.2023.107219

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().