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

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  • Christiane Baumeister

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

  • Christiane Baumeister, 2023. "Pandemic, War, Inflation: Oil Markets at a Crossroads?," NBER Working Papers 31496, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:31496
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    References listed on IDEAS

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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.
    2. Christiane Baumeister & Gert Peersman & Ine Van Robays, 2010. "The Economic Consequences of Oil Shocks: Differences across Countries and Time," RBA Annual Conference Volume (Discontinued), in: Renée Fry & Callum Jones & Christopher Kent (ed.),Inflation in an Era of Relative Price Shocks, Reserve Bank of Australia.
    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.
    4. Hilde C. Bjørnland, 2022. "The effect of rising energy prices amid geopolitical developments and supply disruptions," Working Papers No 07/2022, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.
    5. Christiane Baumeister & Lutz Kilian, 2014. "Real-Time Analysis of Oil Price Risks Using Forecast Scenarios," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 62(1), pages 119-145, April.
    6. Christiane Baumeister & James D. Hamilton, 2022. "Structural Vector Autoregressions with Imperfect Identifying Information," AEA Papers and Proceedings, American Economic Association, vol. 112, pages 466-470, May.
    7. Luca Gagliardone & Mark Gertler, 2023. "Oil Prices, Monetary Policy and Inflation Surges," NBER Working Papers 31263, National Bureau of Economic Research, Inc.
    8. Henrik Wachtmeister & Johan Gars & Daniel Spiro, 2022. "Quantity restrictions and price discounts on Russian oil," Papers 2212.00674, arXiv.org, revised Dec 2022.
    9. Mikkel Plagborg‐Møller & Christian K. Wolf, 2021. "Local Projections and VARs Estimate the Same Impulse Responses," Econometrica, Econometric Society, vol. 89(2), pages 955-980, March.
    10. Christiane Baumeister & Gert Peersman, 2013. "Time-Varying Effects of Oil Supply Shocks on the US Economy," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(4), pages 1-28, October.
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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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