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Not all political relation shocks are alike: Assessing the impacts of US-China tensions on the oil market

Author

Listed:
  • Valérie Mignon

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Yifei Cai
  • Jamel Saadaoui

Abstract

This paper assesses the effects of US-China political tensions on the oil market. Relying on a quantitative measure of these relationships, we investigate how their dynamics impact oil demand, supply, and prices over various periods, starting from 1971 to 2019. To this end, we estimate a structural vector autoregressive model as well as local projections and show that political tensions between the two countries pull down oil demand and raise supply at medium- and long-run horizons. Overall, our findings show that conflicting relationships between these two major players in the oil market may have crucial impacts, such as the development of new strategic partnerships.

Suggested Citation

  • Valérie Mignon & Yifei Cai & Jamel Saadaoui, 2022. "Not all political relation shocks are alike: Assessing the impacts of US-China tensions on the oil market," Working Papers hal-04159797, HAL.
    • Handle: RePEc:hal:wpaper:hal-04159797
    Note: View the original document on HAL open archive server: https://hal.science/hal-04159797v1
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    Keywords

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    JEL classification:

    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • 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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