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Is Oil Political? From the Perspective of Geopolitical Risk

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Listed:
  • Chi -Wei Su
  • Meng Qin
  • Ran Tao
  • Nicoleta -Claudia Moldovan

Abstract

This paper investigates the political property of oil from the perspective of geopolitical risk (GPR). We explore the relationship between GPR and oil price (OP) by performing the full-sample and subsample rolling-window bootstrap Granger causality tests. We find that wars will lead to an increase in OP but that low GPR cannot lead to an immediate decline in price. This finding can also be explained by economic crises, which can make OP soar while GPR is low. In turn, the rise in OP has a positive impact on GPR. The oil market has a significant interaction with geopolitical events, which reflects the pattern of global politics, so we can conclude that oil has a political property. In the context of a tense and complex global relationship, the world can benefit from the political property of oil to prevent GPR, which can in turn facilitate an accurate prediction of OP to reduce the adverse effects of large fluctuations in the oil market.

Suggested Citation

  • Chi -Wei Su & Meng Qin & Ran Tao & Nicoleta -Claudia Moldovan, 2021. "Is Oil Political? From the Perspective of Geopolitical Risk," Defence and Peace Economics, Taylor & Francis Journals, vol. 32(4), pages 451-467, May.
    • Handle: RePEc:taf:defpea:v:32:y:2021:i:4:p:451-467
    DOI: 10.1080/10242694.2019.1708562
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    Cited by:

    1. Islam, Md. Saiful & Islam, Md. Monirul & Rehman, Anis Ur & Alam, Md. Fakhre & Tarique, Md., 2024. "Mineral production amidst the economy of uncertainty: Response of metallic and non-metallic minerals to geopolitical turmoil in Saudi Arabia," Resources Policy, Elsevier, vol. 90(C).
    2. Zhang, Zhikai & Wang, Yudong & Xiao, Jihong & Zhang, Yaojie, 2023. "Not all geopolitical shocks are alike: Identifying price dynamics in the crude oil market under tensions," Resources Policy, Elsevier, vol. 80(C).
    3. Su, Chi Wei & Shao, Xuefeng & Jia, Zhijie & Nepal, Rabindra & Umar, Muhammad & Qin, Meng, 2023. "The rise of green energy metal: Could lithium threaten the status of oil?," Energy Economics, Elsevier, vol. 121(C).
    4. Meng, Lingyan & Li, Jinshi, 2024. "Natural resources volatility and geopolitical risk: A novel perspective of oil and mineral rents using quantile-quantile regression for China," Resources Policy, Elsevier, vol. 88(C).
    5. Jiang, Wei & Zhang, Yanyu & Wang, Kai-Hua, 2024. "Analyzing the connectedness among geopolitical risk, traditional energy and carbon markets," Energy, Elsevier, vol. 298(C).
    6. He, Zhifang & Sun, Hao, 2024. "The time-varying and asymmetric impacts of oil price shocks on geopolitical risk," International Review of Economics & Finance, Elsevier, vol. 91(C), pages 942-957.
    7. Wu, Jie & Zhao, Ruizeng & Sun, Jiasen & Zhou, Xuewei, 2023. "Impact of geopolitical risks on oil price fluctuations: Based on GARCH-MIDAS model," Resources Policy, Elsevier, vol. 85(PB).
    8. Zhang, Xiaojing & Chang, Hsu-Ling & Su, Chi-Wei & Qin, Meng & Umar, Muhammad, 2024. "Exploring the dynamic interaction between geopolitical risks and lithium prices: A time-varying analysis," Resources Policy, Elsevier, vol. 90(C).
    9. Xia, Mingli & Zhu, Guangfeng, 2024. "The importance of intellectual property: Analyzing the impact of resource efficiency improvements in the mineral sector," Resources Policy, Elsevier, vol. 91(C).
    10. Shi, Zhe & Li, Ying, 2023. "China's sustainable development perspective of financial development from the lens of geopolitical risk and resources extraction," Resources Policy, Elsevier, vol. 86(PA).
    11. Zhang, Zhikai & Wang, Yudong & Li, Bin, 2023. "Asymmetric spillover of geopolitical risk and oil price volatility: A global perspective," Resources Policy, Elsevier, vol. 83(C).
    12. Zhang, Zhikai & He, Mengxi & Zhang, Yaojie & Wang, Yudong, 2022. "Geopolitical risk trends and crude oil price predictability," Energy, Elsevier, vol. 258(C).
    13. Tin Hei Alpha Yuen & Wai Kee Thomas Yuen, 2022. "Relationship Between Geopolitical Risk In Major Oil Producing Countries and Oil Price," International Journal of Energy Economics and Policy, Econjournals, vol. 12(5), pages 117-123, September.
    14. Liu, Fangying & Su, Chi Wei & Qin, Meng & Lobonţ, Oana-Ramona, 2023. "Winner or loser? The bidirectional impact between geopolitical risk and energy transition from the renewable energy perspective," Energy, Elsevier, vol. 283(C).
    15. Lee, Chien-Chiang & Wang, Chih-Wei & Thinh, Bui Tien & Purnama, Muhammad Yusuf Indra, 2023. "Cash holdings and cash flows: Do oil price uncertainty and geopolitical risk matter?," Economic Analysis and Policy, Elsevier, vol. 79(C), pages 134-152.
    16. Nguyen, Trang Thi Thuy & Pham, Binh Thai & Sala, Hector, 2022. "Being an emerging economy: To what extent do geopolitical risks hamper technology and FDI inflows?," Economic Analysis and Policy, Elsevier, vol. 74(C), pages 728-746.

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