Assessing the Impacts of US-China Tensions on the Oil Market

NEW WORKING PAPER: This paper aims at assessing 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 1960 to 2019. To this end, we estimate a structural vector autoregressive model as well as local projections and show that trade tensions between the two countries pull down oil demand and supply, whereas prices tend to rise in the very short term. 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.

You are welcome to download, share or comment the following working paper:

Yifei Cai, Valérie Mignon, Jamel Saadaoui. Not All Political Relation Shocks are Alike: Assessing the Impacts of US-China Tensions on the Oil Market. (May 20, 2022).

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