Preliminary Research on the Impact of Geopolitical Risks on Crude Oil Prices in the Chinese Market

Yang Xu

doi:10.54097/rtsgjc66

Authors

Yang Xu

DOI:

https://doi.org/10.54097/rtsgjc66

Keywords:

Geopolitical risk, VAR model, BDS test.

Abstract

As an emerging economy, China has maintained a high growth rate in crude oil consumption due to its rapid economic development. The average year-on-year growth rate in the past 30 years is far higher than the overall world average. The listing of SC crude oil futures in Shanghai marks a new stage for the emerging Chinese crude oil market, which also faces various challenges. In today's world, local wars occur from time to time, geopolitical conflicts never stop, and political undercurrents are surging. In such a situation, what kind of impact will the Chinese crude oil market face? How much is the impact of geopolitical risks on crude oil returns and volatility? This has significant practical implications for both investors and policy makers. The impact of geopolitical risks on the returns of China's crude oil market was obtained by attempting to establish a VAR model and further conducting BDS tests on the residual term. The impact relationship is nonlinear and complex.

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