Not All Political Relation Shocks are Alike: Assessing the Impacts of Us-China Tensions on the Oil Market

30 Pages Posted: 20 May 2022 Last revised: 29 Nov 2022

See all articles by Yifei Cai

Yifei Cai

Independent

Valérie Mignon

EconomiX-CNRS, University of Paris Ouest; Centre d'Etudes Prospectives et d'Info. Internationales (CEPII)

Jamel Saadaoui

University of Paris 8 Vincennes-Saint Denis

Date Written: July 12, 2022

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.

Keywords: China, Oil market, Political relations

Suggested Citation

Cai, Yifei and Mignon, Valérie and Mignon, Valérie and Saadaoui, Jamel, Not All Political Relation Shocks are Alike: Assessing the Impacts of Us-China Tensions on the Oil Market (July 12, 2022). Available at SSRN: https://ssrn.com/abstract=4115272 or http://dx.doi.org/10.2139/ssrn.4115272

Yifei Cai

Independent ( email )

Valérie Mignon (Contact Author)

EconomiX-CNRS, University of Paris Ouest ( email )

200 Avenue de la République
Nanterre, Nanterre Cedex 92001
France

Centre d'Etudes Prospectives et d'Info. Internationales (CEPII) ( email )

113 rue de Grenelle
Paris, F-75007
France

Jamel Saadaoui

University of Paris 8 Vincennes-Saint Denis ( email )

Paris
France

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