Energy prices and geopolitical tensions

• Main Author: Γιαλιά, Ελένη
• Other Authors: Gialia, Eleni
• Language: English
• Published: 2023
• Subjects: Geopolitical risk; Brent oil; Dutch TTF; Electricity day ahead prices; Rolling window estimation; Γεωπολιτικό ρίσκο; Πετρέλαιο brent; Ολλανδικό TTF; Προ-ημερήσια αγορά ηλεκτρικής ενέργειας; Εκτίμηση κυλιόμενου παραθύρου

Energy and geopolitics have always affected one another. This dissertation investigates the timevarying impact of geopolitical instability on the volatility of three of the most consumed energy commodities using monthly data spanning from July 1988 to June 2022. The employed dataset includes the prices of Brent Oil, Dutch TTF and Electricity Day Ahead Prices for Greece for the period December 2014 to June 2022, as well as the global Geopolitical Risk Index. Using a rolling window estimation, initially, the impact of geopolitical risk on the volatility of energy prices is examined, and subsequently, we attempt to separate the geopolitical risks in those caused by geopolitical acts and those caused by geopolitical threats.A static estimation is also provided for each commodity as a comparison tool. Overall, the empirical findings show that there is a time-varying impact of geopolitical risks on the volatility of energy prices. Brent Oil is noticed to have the most impactful effect, and this effect shows up in similar time periods to the Dutch TTF. The periods 2007-2010 and 2014-2019 are those with significant impact while the biggest effect is shown after 2021 for all 3 commodities. For the electricity Day Ahead prices in Greece the only period we notice statistically significant effect is after June 2021.