Macroeconomic Effects of Oil Price Shocks in the Context of Geopolitical Events: Evidence from Selected European Countries

Mariola Piłatowska () and Andrzej Geise
Additional contact information
Mariola Piłatowska: Department of Econometrics and Statistics, Institute of Economy and Finance, Nicolaus Copernicus University in Toruń, Gagarina 13A, 87-100 Toruń, Poland
Andrzej Geise: Department of Econometrics and Statistics, Institute of Economy and Finance, Nicolaus Copernicus University in Toruń, Gagarina 13A, 87-100 Toruń, Poland

Energies, 2025, vol. 18, issue 15, 1-22

Abstract: For a long time, the explanation of the various determinants of oil price fluctuations and their impact on economic activity has been based on the supply and demand mechanism. However, with various volatile changes in the international situation in recent years, such as threats to public health and an increase in regional conflicts, special attention has been paid to the geopolitical context as an additional driver of oil price fluctuations. This study examines the relationship between oil price changes and GDP growth and other macroeconomic variables from the perspective of the vulnerability of oil-importing and oil-exporting countries to unexpected oil price shocks, driven by tense geopolitical events, in three European countries (Norway, Germany, and Poland). We apply the Structural Vector Autoregressive (SVAR) model and orthogonalized impulse response functions, based on quarterly data, in regard to two samples: the first spans 1995Q1–2019Q4 (pre-2020 sample), with relatively gradual changes in oil prices, and the second spans 1995Q1–2024Q2 (whole sample), with sudden fluctuations in oil prices due to geopolitical developments. A key finding of this research is that vulnerability to unpredictable oil price shocks related to geopolitical tensions is higher than in regard to expected gradual changes in oil prices, both in oil-importing and oil-exporting countries. Different causality patterns and stronger responses in regard to GDP growth during the period, including in regard to tense geopolitical events in comparison to the pre-2020 sample, lead to the belief that economies are not more resilient to oil price shocks as has been suggested by some studies, which referred to periods that were not driven by geopolitical events. Our research also suggests that countries implementing policies to reduce oil dependency and promote investment in alternative energy sources are better equipped to mitigate the adverse effects of oil price shocks.

Keywords: geopolitical events; unexpected oil price shocks; economic policy; structural VAR; impulse response (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/1996-1073/18/15/4165/pdf (application/pdf)
https://www.mdpi.com/1996-1073/18/15/4165/ (text/html)

Related works:
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:gam:jeners:v:18:y:2025:i:15:p:4165-:d:1718530

Access Statistics for this article

Energies is currently edited by Ms. Agatha Cao

More articles in Energies from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().