How Do Political Tensions and Geopolitical Risks Impact Oil Prices?

Valérie Mignon () and Jamel Saadaoui ()

Working Papers from HAL

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)
Date: 2023
Note: View the original document on HAL open archive server: https://hal.science/hal-04228303
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Related works:
Journal Article: How do political tensions and geopolitical risks impact oil prices? (2024)
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 political tensions and geopolitical risks impact oil prices? (2023)
Working Paper: How Political Tensions and Geopolitical Risks Impact Oil Prices? (2023)
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