Volume 14, Number 2, December 2024
| The Impact of Geopolitical Risks and the COVID-19 Pandemic on Crude Oil Prices |
Fu-Ju Yang 1, Hsiu-Chuan Lee 2, Jia Hong Wong 1, Yi-Hsien Wang 3*
Abstract
With the accelerated development of global trade, trade cooperation between countries and regions has become the norm, and the global production chain and the consumer side also maintain a close relationship. As a result, after the COVID-19 outbreak in 2019 and the start of the Russo-Ukrainian War in 2022, the global supply of raw materials faces many challenges due to lockdown measures such as stoppage of work and suspension of classes, as well as economic sanctions imposed by many countries on Russia. This leads to higher manufacturing costs, higher transportation costs, higher import prices, and product pricing is affected and the economy is hit. Previous literature pointed out that the price of crude oil, which has a close upstream and downstream relationship with many raw materials for people’s livelihood, is not only determined by the law of supply and demand, but also becomes unpredictable when political uncertainties, wars and financial crises occur. Oil prices were impacted greatly due to the outbreak of COVID-19 and the Russo-Ukrainian War. This study used the EGARCH asymmetric model to conduct an empirical study, took the daily price of Brent crude oil from January 1, 2014 to December 30, 2022 as the sample, and researched the effects of Russo-Ukrainian War and COVID-19 on crude oil price fluctuation. The research results showed that the Russo-Ukrainian War caused a larger oil price shock due to the crude oil supply decrease than the oil price change due to the demand decrease during COVID-19.
Keywords: COVID-19, Russo-Ukrainian War, Fluctuation Of Brent Crude Oil Price, EGARCH, Time Series Analysis
JEL Classification: C58, F18, F64
1 Department of Banking & Finance, Chinese Culture University Taipei,Taiwan
2 Department of Finance, Ming Chuan University, Taipei,Taiwan
3 Doctorate Program in Intelligent Banking and Finance, CTBC Business School, Tainan, Taiwan.
* ( E-mail: wang12@ctbc.edu.tw)