Research On The Impacts Of Geopolitical Risks On Energy Price Volatility

Energy is the driving force of global economic growth and an important strategic resource to ensure national economic and social development.In view of the status of energy in economic development,energy price stability has become a critical issue that many countries pay close attention to.However,since energy is characterized by scarcity,important strategy,the spatial separation of supply and demand,and the low price elasticity of demand,energy prices are highly vulnerable to geopolitical risks.Geopolitical risks are considered to be an extreme risk,which will reduce the output of energy producing countries,cause insufficient energy supply,change the expectation differences about the future energy supply and demand,and affect the energy price volatility.At the same time,as the financial attribute of energy continues to deepen,geopolitical risks have become one of the most important determinants of investment decision-making,which will cause investors to panic,lead to irrational behavior,and ultimately affect energy price volatility.In order to explore the impacts of geopolitical risks on energy(crude oil,natural gas and heating oil)price volatility,firstly,the theoretical model of energy price volatility and the spillover effects of geopolitical risks are theoretically studied,and the direct effect and indirect transmission of geopolitical risks on energy price volatility are theoretically analyzed.We study the energy price volatility from the levels of energy returns and volatility.Using QR model,QQ model and causality in quantiles test,we empirically analyze the asymmetric impacts of geopolitical risks on energy returns and volatility under different market conditions and different risk levels,study the heterogeneous effects of different types of geopolitical risks on energy returns and volatility,as well as the transmission mechanism of geopolitical risks on energy returns and volatility,finally find the realization path to achieve energy price stability under the influences of geopolitical risks.The main conclusions include:(1)Under different market conditions and risk levels,the impacts of geopolitical risks on energy returns are asymmetric.Geopolitical risks have depressing effects on crude oil returns,which are mainly concentrated in the bearish market;under high or low risk levels,geopolitical risks cause energy returns to appear maximum and minimum.(2)Under different market conditions and risk levels,the effects of geopolitical risks on energy volatility are asymmetric.Geopolitical risks can promote crude oil volatility,which appears in all markets;geopolitical risks inhibit natural gas volatility and are concentrated in normal and bullish markets;in the bullish market,low-level geopolitical risks inhibit energy volatility,while high-level geopolitical risks have promoting effects,and there are extreme values in these regions.(3)Different types of geopolitical risks have heterogeneous effects on energy price volatility.The depressing effects of geopolitical acts on crude oil returns appear in the bearish market;geopolitical threats promote crude oil volatility,and geopolitical acts promote heating oil volatility,which exist in different markets;the impacts of different-level geopolitical threats and high-level geopolitical acts on energy returns and volatility are unstable.(4)Through different channels,the influences of geopolitical risks are transmitted to energy price volatility.Under the supply and demand channel,geopolitical risks do not affect energy returns;under the uncertainty channel,geopolitical risks reduce heating oil volatility through economic policy uncertainty,increase energy volatility through market uncertainty,and cause changes in crude oil and heating oil returns;under the financial market channel,geopolitical risks increase natural gas volatility through interest rate,reduce crude oil and natural gas returns and volatility through exchange rate,and increase energy returns through gold,moreover,the transmission effects of these channels appear in different market conditions.The main contributions of this paper are as follows:(1)Since crude oil,natural gas and heating oil represent energy,and the returns and volatility reflect price volatility,we systematically analyze the overall impacts of geopolitical risks on energy price volatility from the two aspects of energy returns and volatility.(2)The market is divided into bearish market,normal market and bullish market,and the risk level is divided into low level,medium level and high level.We construct a nonlinear framework for the effects of geopolitical risks on energy price volatility,which provide new ideas and analysis tools for in-depth exploration of the effects of geopolitical risks.(3)Geopolitical risks indirectly affect energy price volatility through different transmission channels.Based on the analysis of the transmission mechanism of geopolitical risks indirectly affecting energy price volatility,we clarify how geopolitical risks affect energy price volatility,and further deepen the understanding of the regularity of energy price volatility.