Assessing the Influence of Geopolitical Risks and Indian Uncertainty Index on Energy Sector with VECM

Bharat Kumar Meher (), Abhishek Anand (), Daniel Frank (), Sanjay Kumar Das () and Manohar Singh ()
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Bharat Kumar Meher: PG Department of Commerce and Management, Purnea University, Purnia, Bihar, India
Abhishek Anand: PG Department of Economics, Purnea University, Purnia, Bihar, India
Daniel Frank: Department of Commerce, Manipal Academy of Higher Education, Manipal, Udupi, Karnataka, India
Sanjay Kumar Das: Department of Economics, Purnea Mahila Mahavidyalaya, Purnia, Bihar, India
Manohar Singh: Department of Commerce, Government Autonomous PG College, Chhindwara, Madhya Pradesh, India

International Journal of Energy Economics and Policy, 2025, vol. 15, issue 4, 481-489

Abstract: The energy industry is susceptible to geopolitical challenges, like armed conflicts, international disputes, and diplomatic tensions. These factors can result in disruptions to energy supplies, instability in energy prices, and shifts in energy-related policies and strategies. This study explores the impact of Geopolitical Risk (GPR) and India News-Based Policy Uncertainty Index on India's Energy Sector. To achieve this, several GPR indices and the India News-Based Uncertainty Index is employed as explanatory variables. Response variables to develop a Vector Error Correction Model (VECM) comprised monthly values of the energy index, prices of energy commodities, and stock prices of the top three companies. The analysis encompassed data from February 2011 to August 2023, totaling 151 data points. Contrary to the established theory that suggests that GPR significantly affects crude oil prices, this study finds no supportive evidence, indicating that neither the GPR indices nor the India News-Based Policy Uncertainty Index are statistically significant within the VECM framework. This nuanced analysis highlights the complex interrelationship between geopolitical risks, uncertainty, and different segments of India's energy market.

Keywords: Geopolitical Risk; Policy Uncertainty Index; VECM; MCX; NIFTY Energy; Crude Oil; Natural Gas (search for similar items in EconPapers)
Date: 2025
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DOI: 10.32479/ijeep.19170

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