IDEAS home Printed from https://ideas.repec.org/a/pal/palcom/v11y2024i1d10.1057_s41599-023-02526-9.html
   My bibliography  Save this article

The impact of Russia–Ukraine war on crude oil prices: an EMC framework

Author

Listed:
  • Qi Zhang

    (University of Chinese Academy of Sciences
    University of Chinese Academy of Sciences)

  • Yi Hu

    (University of Chinese Academy of Sciences
    Chinese Academy of Sciences
    MOE Social Science Laboratory of Digital Economic Forecasts and Policy Simulation at UCAS)

  • Jianbin Jiao

    (University of Chinese Academy of Sciences)

  • Shouyang Wang

    (University of Chinese Academy of Sciences
    Chinese Academy of Sciences
    ShanghaiTech University)

Abstract

As the second-largest oil producer and natural gas exporter, Russia’s war with Ukraine has severely impacted the energy market. To what extent has the war influenced crude oil prices, and has it altered the long-term dynamics of oil prices? An objective analysis of the effects of the Russia–Ukraine war on the crude oil market can assist relevant entities in developing both short-term emergency strategies and long-term response plans. This study establishes an analytical framework of the event analysis method based on multiresolution causality testing (EMC). The results of the multiresolution causality testing reveal a significant one-way causality between the Russia–Ukraine war and crude oil prices. Afterward, using the event analysis based on variational mode decomposition (VMD), from October 1, 2021, to August 25, 2022, as the event window, we found that the war and its chain events caused the West Texas Intermediate (WTI) crude oil prices to increase by $37.14, a 52.33% surge, and the Brent crude oil price to rise by $41.49, a 56.33% increase. During the event window, the Russia–Ukraine war can account for 70.72% and 73.62% of the fluctuation in WTI and Brent crude oil prices, respectively. Furthermore, the war amplified oil price volatility and fundamentally altered the trend of crude oil prices. Consequently, this study proposes four recommendations: the establishment of an emergency management mechanism for the oil market, the diversification of oil and gas imports by energy-importing countries, the steady advancement of energy transformation, and the judicious use of financial instruments by enterprises to hedge risks.

Suggested Citation

  • Qi Zhang & Yi Hu & Jianbin Jiao & Shouyang Wang, 2024. "The impact of Russia–Ukraine war on crude oil prices: an EMC framework," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-12, December.
    • Handle: RePEc:pal:palcom:v:11:y:2024:i:1:d:10.1057_s41599-023-02526-9
    DOI: 10.1057/s41599-023-02526-9
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1057/s41599-023-02526-9
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1057/s41599-023-02526-9?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Dario Caldara & Matteo Iacoviello, 2022. "Measuring Geopolitical Risk," American Economic Review, American Economic Association, vol. 112(4), pages 1194-1225, April.
    2. Ji, Qiang & Guo, Jian-Feng, 2015. "Oil price volatility and oil-related events: An Internet concern study perspective," Applied Energy, Elsevier, vol. 137(C), pages 256-264.
    3. Zavadska, Miroslava & Morales, Lucía & Coughlan, Joseph, 2020. "Brent crude oil prices volatility during major crises," Finance Research Letters, Elsevier, vol. 32(C).
    4. Evangelos Vasileiou, 2022. "Abnormal returns and anti-leverage effect in the time of Russo-Ukrainian War 2022: evidence from oil, wheat and natural gas markets," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 50(5), pages 1063-1072, September.
    5. Zhang, Xun & Yu, Lean & Wang, Shouyang & Lai, Kin Keung, 2009. "Estimating the impact of extreme events on crude oil price: An EMD-based event analysis method," Energy Economics, Elsevier, vol. 31(5), pages 768-778, September.
    6. He, Kaijian & Yu, Lean & Lai, Kin Keung, 2012. "Crude oil price analysis and forecasting using wavelet decomposed ensemble model," Energy, Elsevier, vol. 46(1), pages 564-574.
    7. Chen, Hao & Liao, Hua & Tang, Bao-Jun & Wei, Yi-Ming, 2016. "Impacts of OPEC's political risk on the international crude oil prices: An empirical analysis based on the SVAR models," Energy Economics, Elsevier, vol. 57(C), pages 42-49.
    8. Wenwu Zhao & Caichun Yin & Ting Hua & Michael E. Meadows & Yan Li & Yanxu Liu & Francesco Cherubini & Paulo Pereira & Bojie Fu, 2022. "Achieving the Sustainable Development Goals in the post-pandemic era," Palgrave Communications, Palgrave Macmillan, vol. 9(1), pages 1-7, December.
    9. Mahmoud A. El-Gamal and Amy Myers Jaffe, 2018. "The Coupled Cycles of Geopolitics and Oil Prices," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
    10. Liu, Weiping & Wang, Chengzhu & Li, Yonggang & Liu, Yishun & Huang, Keke, 2021. "Ensemble forecasting for product futures prices using variational mode decomposition and artificial neural networks," Chaos, Solitons & Fractals, Elsevier, vol. 146(C).
    11. Koch, Nicolas, 2014. "Tail events: A new approach to understanding extreme energy commodity prices," Energy Economics, Elsevier, vol. 43(C), pages 195-205.
    12. Mengmeng Hao & Fangyu Ding & Xiaolan Xie & Jingying Fu & Yushu Qian & Tobias Ide & Jean-François Maystadt & Shuai Chen & Quansheng Ge & Dong Jiang, 2022. "Varying climatic-social-geographical patterns shape the conflict risk at regional and global scales," Palgrave Communications, Palgrave Macmillan, vol. 9(1), pages 1-8, December.
    13. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
    14. Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22.
    15. Ju, Keyi & Su, Bin & Zhou, Dequn & Wu, Junmin & Liu, Lifan, 2016. "Macroeconomic performance of oil price shocks: Outlier evidence from nineteen major oil-related countries/regions," Energy Economics, Elsevier, vol. 60(C), pages 325-332.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Haykel Tlili & Kais Tissaoui & Bassem Kahouli & Rabab Triki, 2024. "How volatility in the oil market and uncertainty shocks affect Saudi economy: a frequency approach," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-24, December.
    2. Gugushvili, Alexi, 2024. "Perceptions of the Consequences of War in Ukraine: Exploring a Russian Paradox," SocArXiv y8rzh, Center for Open Science.
    3. Koczar, Monika W. & Jareño, Francisco & Escribano, Ana, 2024. "Dynamic linkages and contagion effects: Analyzing the linkages between crude oil prices, US market sector indices and energy markets," The North American Journal of Economics and Finance, Elsevier, vol. 74(C).
    4. Wenlong Yang & Wentian Shi & Dongcheng Chen, 2024. "Unveiling the nexus: exploring the influence of terrorism on energy trade in China and the Belt and Road countries," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-16, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Zhu, Yongguang & Xu, Deyi & Cheng, Jinhua & Ali, Saleem Hassan, 2018. "Estimating the impact of China's export policy on tin prices: a mode decomposition counterfactual analysis method," Resources Policy, Elsevier, vol. 59(C), pages 250-264.
    2. Zhang, Qi & Yang, Kun & Hu, Yi & Jiao, Jianbin & Wang, Shouyang, 2023. "Unveiling the impact of geopolitical conflict on oil prices: A case study of the Russia-Ukraine War and its channels," Energy Economics, Elsevier, vol. 126(C).
    3. Zhao, Jing, 2022. "Exploring the influence of the main factors on the crude oil price volatility: An analysis based on GARCH-MIDAS model with Lasso approach," Resources Policy, Elsevier, vol. 79(C).
    4. Yue Liu & Hao Dong & Pierre Failler, 2019. "The Oil Market Reactions to OPEC’s Announcements," Energies, MDPI, vol. 12(17), pages 1-15, August.
    5. Jin, Xuejun & Zhu, Keer & Yang, Xiaolan & Wang, Shouyang, 2021. "Estimating the reaction of Bitcoin prices to the uncertainty of fiat currency," Research in International Business and Finance, Elsevier, vol. 58(C).
    6. Zhou, Jie & Sun, Mei & Han, Dun & Gao, Cuixia, 2021. "Analysis of oil price fluctuation under the influence of crude oil stocks and US dollar index — Based on time series network model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 582(C).
    7. Monge, Manuel & Romero Rojo, María Fátima & Gil-Alana, Luis Alberiko, 2023. "The impact of geopolitical risk on the behavior of oil prices and freight rates," Energy, Elsevier, vol. 269(C).
    8. James Ming Chen & Mobeen Ur Rehman, 2021. "A Pattern New in Every Moment: The Temporal Clustering of Markets for Crude Oil, Refined Fuels, and Other Commodities," Energies, MDPI, vol. 14(19), pages 1-58, September.
    9. Riza Demirer & Rangan Gupta & Qiang Ji & Aviral Kumar Tiwari, 2018. "Geopolitical Risks and the Predictability of Regional Oil Returns and Volatility," Working Papers 201860, University of Pretoria, Department of Economics.
    10. Selmi, Refk & Bouoiyour, Jamal & Miftah, Amal, 2020. "Oil price jumps and the uncertainty of oil supplies in a geopolitical perspective: The role of OPEC’s spare capacity," International Economics, Elsevier, vol. 164(C), pages 18-35.
    11. Philip Barrett & Mariia Bondar & Sophia Chen & Mali Chivakul & Deniz Igan, 2024. "Pricing protest: the response of financial markets to social unrest," Review of Finance, European Finance Association, vol. 28(4), pages 1419-1450.
    12. Ben Cheikh, Nidhaleddine & Ben Naceur, Sami & Kanaan, Oussama & Rault, Christophe, 2021. "Investigating the asymmetric impact of oil prices on GCC stock markets," Economic Modelling, Elsevier, vol. 102(C).
    13. Liu, Chang & Liu, Yuan & Zhang, Dayong & Xie, Chunping, 2022. "The capital market responses to new energy vehicle (NEV) subsidies: An event study on China," Energy Economics, Elsevier, vol. 105(C).
    14. Nicholas Apergis & Konstantinos Gavriilidis & Rangan Gupta, 2023. "Does climate policy uncertainty affect tourism demand? Evidence from time-varying causality tests," Tourism Economics, , vol. 29(6), pages 1484-1498, September.
    15. Ju, Keyi & Su, Bin & Zhou, Dequn & Zhang, Yuqiang, 2016. "An incentive-oriented early warning system for predicting the co-movements between oil price shocks and macroeconomy," Applied Energy, Elsevier, vol. 163(C), pages 452-463.
    16. Bai, Ye & Chow, Darien Yan Pang, 2017. "Shanghai-Hong Kong Stock Connect: An analysis of Chinese partial stock market liberalization impact on the local and foreign markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 50(C), pages 182-203.
    17. Guo, Peng & Shi, Jing, 2024. "Geopolitical risks, investor sentiment and industry stock market volatility in China: Evidence from a quantile regression approach," The North American Journal of Economics and Finance, Elsevier, vol. 72(C).
    18. Liao, Huei-Chu & Lee, Yi-Huey & Suen, Yu-Bo, 2008. "Electronic trading system and returns volatility in the oil futures market," Energy Economics, Elsevier, vol. 30(5), pages 2636-2644, September.
    19. Liu, Chang & Liu, Linlin & Zhang, Dayong & Fu, Jiasha, 2021. "How does the capital market respond to policy shocks? Evidence from listed solar photovoltaic companies in China," Energy Policy, Elsevier, vol. 151(C).
    20. Qian, Yu & Xu, Zeshui & Qin, Yong & Gou, Xunjie & Skare, Marinko, 2023. "Measuring the varying relationships between sustainable development and oil booms in different contexts: An empirical study," Resources Policy, Elsevier, vol. 85(PB).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:palcom:v:11:y:2024:i:1:d:10.1057_s41599-023-02526-9. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: https://www.nature.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.