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Pandemic, War, Inflation: Oil Markets at a Crossroads?

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  • Baumeister, Christiane

Abstract

The COVID-19 pandemic as well as the Russian invasion of Ukraine have had profound effects on the global energy landscape, with some of the longer-lasting effects still unfolding. This paper discusses how these events have reshaped the supply side of the global oil market by focusing on structural changes in each of the three main oil-producing countries. The demand side has responded to geopolitical developments by devising a set of policy tools to stabilize oil markets and counter inflationary pressures. In particular, the price cap policy was introduced to supplement the EU embargo on seaborne Russian oil exports, and record volumes of oil were released from government-controlled emergency stockpiles. The sources of oil price fluctuations associated with these events are also discussed, as is their role in the recent surge of inflation, with a particular focus on the heterogeneity in the pass-through of oil supply shocks within the Euro area.

Suggested Citation

  • Baumeister, Christiane, 2023. "Pandemic, War, Inflation: Oil Markets at a Crossroads?," CEPR Discussion Papers 18347, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18347
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    1. Olivier J. Blanchard & Ben S. Bernanke, 2023. "What Caused the US Pandemic-Era Inflation?," NBER Working Papers 31417, National Bureau of Economic Research, Inc.
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    3. Knut Are Aastveit & Hilde C. Bjørnland & Jamie L. Cross, 2023. "Inflation Expectations and the Pass-Through of Oil Prices," The Review of Economics and Statistics, MIT Press, vol. 105(3), pages 733-743, May.
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    12. Christiane Baumeister & James D. Hamilton, 2019. "Structural Interpretation of Vector Autoregressions with Incomplete Identification: Revisiting the Role of Oil Supply and Demand Shocks," American Economic Review, American Economic Association, vol. 109(5), pages 1873-1910, May.
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    Cited by:

    1. Mignon, Valérie & Saadaoui, Jamel, 2024. "How do political tensions and geopolitical risks impact oil prices?," Energy Economics, Elsevier, vol. 129(C).
    2. Knut Are Aastveit & Hilde C. Bjornland & Jamie L. Cross & Helene Olsen Kalstad, 2024. "Unveiling inflation: Oil Shocks, Supply Chain Pressures, and Expectations," CAMA Working Papers 2024-68, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    3. Jamel Saadaoui, 2024. "The Impact of Political Tensions and Geopolitical Risks on Oil Prices in Unstable Environments," Working Papers 2024.13, International Network for Economic Research - INFER.

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    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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