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The Effects of Geopolitical Risks on Oil Price Volatility

Author

Listed:
  • Loc Dong Truong

    (School of Economics, Can Tho University, Can Tho City, Vietnam)

  • Nhien Tuyet Doan

    (School of Economics, Can Tho University, Can Tho City, Vietnam)

  • Anh Thi Kim Nguyen

    (Faculty of Economics and Business Administration, An Giang University, Vietnam National University Ho Chi Minh City, Vietnam)

Abstract

This study investigates the short-term and long-term effects of geopolitical risks on the volatility of oil price. Data used in this study are the daily geopolitical risk index, oil price and USD index during the period from January 4th, 2010 to December 31st, 2022. Using the autoregressive distributed lag (ARDL) bounds testing approach, the empirical results confirm that the geopolitical risks has positive effects on the volatility of oil price in both the long-term and short-term, meaning that an decrease in the geopolitical risk Index is associated with an increase in the volatility of oil price. In addition, the results derived from the ARDL model indicate that USD index has a positive effect on the volatility of oil price in the short-term, but it has no impact on the volatility of oil price in the long-term. Finally, the results of the error correction model confirm that only 2.81 percent of the disequilibria from the previous trading day is converged and corrected back to the long-run equilibrium in the current trading day.

Suggested Citation

  • Loc Dong Truong & Nhien Tuyet Doan & Anh Thi Kim Nguyen, 2024. "The Effects of Geopolitical Risks on Oil Price Volatility," International Journal of Energy Economics and Policy, Econjournals, vol. 14(1), pages 427-432, January.
    • Handle: RePEc:eco:journ2:2024-01-46
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    More about this item

    Keywords

    Geopolitical risks; oil price volatility; ARDL;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • Q34 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Natural Resources and Domestic and International Conflicts
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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