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Exploring the vital role of geopolitics in the oil market: The case of Russia

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  • Wang, Xinghua
  • Lee, Zhengzheng
  • Wu, Shuang
  • Qin, Meng

Abstract

Investigating the essential role of geopolitics in the oil market is significant for investors to optimize their portfolios. This paper takes Russian geopolitics into consideration and innovatively conducts the sub-sample test to explore the time-dependent interaction between oil price (OP) and Russian geopolitical risk (RGR). The outcomes refer to that RGR could positively and adversely affect OP. The positive effects point out that high RGR might boost the oil market, resulting in an increase in OP. However, this opinion can not be evidenced by the adverse influences, which mainly due to the apolitical factors. In turn, there exist positive impacts of OP on RGR, suggesting that high OP might deteriorate the geopolitical circumstance in Russia, and the oil market could be considered as an indicative factor to grasp RGR more comprehensively. In the context of increasingly complex geopolitics in Russia, investors could benefit from the oil market to reduce potential losses and gain profits from their investment. Besides, Russian government could predict RGR on the basis of OP to protect the health of their citizens and national security.

Suggested Citation

  • Wang, Xinghua & Lee, Zhengzheng & Wu, Shuang & Qin, Meng, 2023. "Exploring the vital role of geopolitics in the oil market: The case of Russia," Resources Policy, Elsevier, vol. 85(PB).
    • Handle: RePEc:eee:jrpoli:v:85:y:2023:i:pb:s0301420723006207
    DOI: 10.1016/j.resourpol.2023.103909
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    More about this item

    Keywords

    Oil price; Russian geopolitics; Causality; Non-constant;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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