Geopolitical Risk Versus Supply- and Demand-Induced Oil Shocks
Journal: Energy RESEARCH LETTERS
Year: 2025

Amid ongoing geopolitical events and their associated impact on energy markets, this study probes into the predictive capability of geopolitical risk (GPR) for various components of oil shocks. It also evaluates whether incorporating GPR in oil shock-model improves the forecast accuracy of global oil shocks, focusing exclusively on out-of-sample analysis. The findings indicate that (i) GPR induces a negative shock to oil supply, (ii) GPR generates a positive shock to oil consumption demand, and