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The impact of oil prices on trade

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  • Simeon Nanovsky

Abstract

This paper introduces an oil price–distance interaction variable in a gravity equation to explain how global trade behaves as a result of oil price changes. The findings are that as oil prices increase, international trade becomes more localized in that countries begin trading relatively more with their neighbors. In contrast, when they decrease, trade becomes more dispersed in that the distance between countries becomes less relevant. These results are highly significant across specifications, and the magnitude is not to be ignored. According to the full specification an oil price halving will make trade more dispersed by relatively increasing trade by 40% for a distance of 10,000 miles and by 25% for a distance of 1,000 miles.

Suggested Citation

  • Simeon Nanovsky, 2019. "The impact of oil prices on trade," Review of International Economics, Wiley Blackwell, vol. 27(1), pages 431-447, February.
    • Handle: RePEc:bla:reviec:v:27:y:2019:i:1:p:431-447
    DOI: 10.1111/roie.12383
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    Cited by:

    1. Tarek Tawfik Yousef Alkhateeb & Haider Mahmood, 2020. "The Oil Price and Trade Nexus in the Gulf Co-Operation Council Countries," Resources, MDPI, vol. 9(12), pages 1-19, November.
    2. Tarek Tawfik Yousef Alkhateeb & Haider Mahmood, 2020. "Oil Price and Energy Depletion Nexus in GCC Countries: Asymmetry Analyses," Energies, MDPI, vol. 13(12), pages 1-13, June.
    3. Mereke Tanaguzova & Simeon Nanovsky & Serik Orazgaliyev, 2023. "Assessing the Effect of Joining the World Trade Organization on Trade Performance: A Study of CIS Countries," Economies, MDPI, vol. 11(9), pages 1-17, September.

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