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Testing oil price volatility during Covid-19: Global economic impact

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  • Chang, Lei
  • Baloch, Zulfiqar Ali
  • Saydaliev, Hayot Berk
  • Hyder, Mansoor
  • Dilanchiev, Azer

Abstract

This paper is occasioned by the current events in the crude oil markets throughout the Covid pandemic time. The study analyzes the evolving nature of crude oil cost unpredictability caused by the variations that influence the crude sector throughout the current contagion. Every day's dataset is within the first month of 2020 and December 30, 2021 were measured by applying VAR and GARCH models. The results corroborate that the current contagion has adverse effects on the crude sector, primarily in two ways. It resulted in the headwinds for demand and cut international demand for crude oil, increasing uncertainty for major advanced and developing nations. Next, it resulted in output headwinds as the pandemic caused hydrocarbons conflicts among the leading crude supplying countries. The two headwinds seem to have caused the more than necessary crude unpredictability. Moreover, it was found that the United States output, total requirements, and crude-leaning demand shocks adversely affect the supply unpredictability of the United States and the extractive sectors. The findings depict that crude price instability responded significantly to the contagion caused by crude headwinds. Specifically, the study recorded the effect of uncertainty because of these headwinds beyond financiers' concerns about crude price instability. This study indicates that spillovers do not have meaningful forecast data, igniting critical debates concerning the relevance of the spillover indicator for predicting at minimal sampling occurrence.

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  • Chang, Lei & Baloch, Zulfiqar Ali & Saydaliev, Hayot Berk & Hyder, Mansoor & Dilanchiev, Azer, 2022. "Testing oil price volatility during Covid-19: Global economic impact," Resources Policy, Elsevier, vol. 78(C).
    • Handle: RePEc:eee:jrpoli:v:78:y:2022:i:c:s0301420722003361
    DOI: 10.1016/j.resourpol.2022.102891
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