Munich Personal RePEc Archive

Geopolitical Tensions, OPEC News, and Oil Price: A Granger Causality Analysis

Medel, Carlos A. (2015): Geopolitical Tensions, OPEC News, and Oil Price: A Granger Causality Analysis.

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Abstract

To what extent geopolitical tensions in major oil-producer countries and unexpected news related to the Organisation of the Petroleum Exporting Countries (OPEC) affect oil price? What are the effects of non-market externalities in oil price? Are oil price forecasters aware or affected by such externalities when making their predictions? In this article, I analyse the influence of these events on oil price by means of Granger causality, using a unique measure of geopolitical events accounting for supply disruptions for the 2001-12 period. I found evidence favouring OPEC countries'-related news as an oil price driver jointly with supply disruptions influencing short-term forecasts, and reducing the consensus when unanticipated news are available. When considering separately OPEC news or other supply disruptions, the evidence is rather episodic.

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