Political Cycles and Oil Prices: Understanding the Geopolitical Oil Supply
33 Pages Posted: 23 Dec 2018 Last revised: 12 Mar 2019
Date Written: December 5, 2018
Abstract
Real oil prices (WTI spot) are lower under Democratic presidencies than Republican presidencies by $4.7 - $9.7 per barrel, the results are statistically significant and robust, including subsamples and accounting for business cycles fluctuations. We find that during Democratic presidencies, the overall supply of energy increases for several possible explanations, including more alternative energy initiatives by Democrats, energy companies discouraging costly alternative clean energies, and the role of lobbying in shaping U.S. energy policy. We also find that oil prices and volatility comove with a president’s life cycle (seniority), and prices are lower during second term presidencies. Altogether, the price of oil is influenced by political cycles and seniority of the president.
Keywords: Oil prices, political cycle, president’s seniority
JEL Classification: G12
Suggested Citation: Suggested Citation