Analyzing the dynamics of oil price volatility: a comparative study of market fundamentals and global uncertainty

Youness EL Amine () and Mounir Benboubker
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Youness EL Amine: FSJES, USMBA
Mounir Benboubker: FSJES, USMBA

Economia Politica: Journal of Analytical and Institutional Economics, 2025, vol. 42, issue 3, No 8, 829-851

Abstract: Abstract This study investigates the determinants of oil price volatility by applying a Time-Varying Parameter Vector Autoregressive model with stochastic volatility (TVP-VAR-SV) to weekly data from 2010 to 2022. A comparative examination of global uncertainty and market fundamentals reveals three distinct phases, characterized by a shifting dominance of volatility drivers. Between 2010 and 2016, demand and geopolitical risk drove oil prices; From 2016 to 2020, economic policy uncertainty emerged as a potent driver; And in the final phase (2020–2022), geopolitical risk emerged as the primary driver of price fluctuations. The results further indicate that market fundamental shocks last for 8–12 weeks, requiring short-term interventions, while uncertainty drivers last up to 30 weeks, necessitating more sustained interventions. The findings demonstrate the importance of incorporating temporal variability into decision-making and policy formulation frameworks.

Keywords: TVP-VAR model; Stochastic volatility; Oil price volatility; Market fundamentals; Global uncertainty; Demand shocks; Geopolitical risk index; Temporal variability; C32; Q40; Q41 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s40888-025-00373-2

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