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Crude oil pricing and statecraft: Surprising lessons from US economic sanctions

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  • Omar, Ayman
  • Lambe, Brendan John

Abstract

This study investigates the effects of US sanctions on crude oil prices, and estimates the associated losses or gains accrued to US output due to economic coercion. Using a sample of US sanctions imposed between 1987 and 2016, we find that oil prices exhibit a significant abnormal adjustment in magnitude. We show that the nature of the change is decided by the target country's status either as a net importer or exporter of oil. Our findings further reveal that while the abnormal rise in oil prices, associated with sanctions on net exporters, inflict losses on US output, coercive measures on net importers give rise to economic gains due to significant decline in oil valuations. Such externalities do not appear to be considered when designing and deploying measures of economic coercion. (JEL Q41, Q43, Q48).

Suggested Citation

  • Omar, Ayman & Lambe, Brendan John, 2022. "Crude oil pricing and statecraft: Surprising lessons from US economic sanctions," International Review of Financial Analysis, Elsevier, vol. 83(C).
    • Handle: RePEc:eee:finana:v:83:y:2022:i:c:s1057521922002678
    DOI: 10.1016/j.irfa.2022.102314
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    More about this item

    Keywords

    Sanctions; Crude oil; Disruptions; Macroeconomy;
    All these keywords.

    JEL classification:

    • 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
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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