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Impact of geopolitical risks on oil price fluctuations: Based on GARCH-MIDAS model

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  • Wu, Jie
  • Zhao, Ruizeng
  • Sun, Jiasen
  • Zhou, Xuewei

Abstract

Coping with uncertain risks has emerged as a crucial topic of discussion in the global energy market. This study uses single-factor and two-factor GARCH-MIDAS-GPR models to examine the influence of GPR on oil prices (OP) and its internal mechanisms. In addition, this study examines the influence of GPR on fluctuations in OP in typical oil-importing and oil-exporting countries. Additionally, it analyzes the heterogeneity across various time domains. The study yielded the following conclusions. First, GPR positively influences OP fluctuations and oil demand while exerting a significant negative impact on oil supply. Second, the GPR of oil-exporting countries has a noticeable influence on OP fluctuations than that of oil-importing ones. Third, GPR exhibits varying impacts on oil demand and supply across different time domains. Fourth, heterogeneity exists in the impact of geopolitical threats and geopolitical actions on OP fluctuation, oil demand, and supply. Finally, this study proposes specific recommendations to address the issues identified.

Suggested Citation

  • 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).
    • Handle: RePEc:eee:jrpoli:v:85:y:2023:i:pb:s0301420723006931
    DOI: 10.1016/j.resourpol.2023.103982
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