Oil Price Shocks During the COVID-19 Pandemic: Evidence From United Kingdom Energy Stocks

Abstract

We investigate the dynamic relationship between global oil prices, the stock market, and oil and gas stock (FTSE-OG) returns in the UK through a structural vector autoregressive (VAR) framework during the COVID-19 pandemic. The structural VAR results suggest that the impact of structural shocks related to the global oil price on FTSE-OG index returns becomes less important and loses its explanatory power during the pandemic. However, stock market shocks increase their explanatory power in the variations of FTSE-OG index returns.

The effects of COVID-19 on the interrelationship among oil prices, stock prices and exchange rates in selected oil exporting economies

“…Further, using a SVAR model, Mugaloglu et al (2021) find that structural fluctuations linked to the international crude oil market were unimportant with little explanatory power, whereas volatilities related to stock market became pronounced as their explanatory power increased during the coronavirus health crisis. Zhang (2021) observed that the COVID-19 enhances stock market returns in China, but faintly intensified the oil stock volatility.…”

Pandemics and Oil Shocks

“…Since the 2008 financial crisis, the focus of the oil literature has been on examining whether financial market conditions predict oil prices (Zhang and Cao 2013;Kilain 2014;Mohammed 2020;Natoli 2021). However, recently, the focus has shifted on the impact of pandemics on oil prices (Albulescu 2021;Mugaloglu et al 2021;Salisu et al 2020, Bakas andTriantafyllou 2020;Salisu and Adediran 2020;Lyocsa and Molnar 2020;Sharif et al 2020;Yang et al 2021;Zhang et al 2020).…”

A Free-Market Environmentalist Enquiry on Spain’s Energy Transition along with Its Recent Increasing Electricity Prices

“…However, electricity prices have been increasing in recent years [ 40 ], mainly due to the increasing energy and oil prices, the energy supply uncertainty during the post-pandemic, and the war in Ukraine [ 41 , 42 ]. The erupt energy demand and inflationary monetary policies are among the main factors of the increasing global energy prices [ 41 , 42 ].…”

“…However, electricity prices have been increasing in recent years [ 40 ], mainly due to the increasing energy and oil prices, the energy supply uncertainty during the post-pandemic, and the war in Ukraine [ 41 , 42 ]. The erupt energy demand and inflationary monetary policies are among the main factors of the increasing global energy prices [ 41 , 42 ]. In the case of Spain, El País shows that household electricity prices in October 2021 were 63% higher than a year earlier, according to Spanish National Statistics Institute (INE) [ 43 ].…”