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Geopolitical Risk and the LNG-LPG Trade

Author

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  • Michail Nektarios A.

    (Economic Analysis and Research Department, Central Bank of Cyprus, School of Economics and Business and Cyprus University of Technology, Thessaloniki, Greece)

  • Melas Konstantinos D.

    (Department of Economics, University of Western Macedonia, Kastoria, Greece)

Abstract

We explore the relationship between Liquified Natural Gas (LNG) and Liquified Petroleum Gas (LPG) carrier freight rates and global geopolitical risk, while also controlling for the macro environment. Our results show that a shock in geopolitical risk significantly increases the cost of the spot charter rates for both LNG and LPG carriers, with the impact reaching around 25% for the former and 18% for the latter. Our results bear significant implications for both the companies and the countries involved in the liquefied gas trade, with its importance growing as the use of this energy source is likely to continue substituting other fossil fuels in the future.

Suggested Citation

  • Michail Nektarios A. & Melas Konstantinos D., 2022. "Geopolitical Risk and the LNG-LPG Trade," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 28(3), pages 243-265, September.
    • Handle: RePEc:bpj:pepspp:v:28:y:2022:i:3:p:243-265:n:3
    DOI: 10.1515/peps-2022-0007
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    Cited by:

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    2. Chen, Zhiguo & Gao, Wei & Zafar, Quratulain & Dördüncü, Hazar, 2023. "Natural resources extraction and geopolitical risk: Examining oil resources extraction in China," Resources Policy, Elsevier, vol. 85(PA).
    3. Zhang, Yi & Zhang, Leilei & Yu, Hang & Tu, Yanhong, 2023. "Does Geopolitical risk drive natural resources extraction globally? A Case of Global," Resources Policy, Elsevier, vol. 82(C).

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    More about this item

    Keywords

    geopolitical risk; LNG; LPG; international trade; shipping;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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