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Examining the dynamic effect of COVID-19 pandemic on dwindling oil prices using structural vector autoregressive model

Emergence of COVID-19 pandemic in China hit oil prices most, traded at a negative for the first time ever in the international oil market. In this paper, we examine the dynamic effect on four major oil prices of COVID-19 with reference to China and Nigeria. We use daily frequency data, and employ st...

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Autores principales: Adedeji, Abdulkabir N., Ahmed, Funmilola F., Adam, Shehu U.
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Elsevier Ltd. 2021
Materias:
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9761933/
https://www.ncbi.nlm.nih.gov/pubmed/36568912
http://dx.doi.org/10.1016/j.energy.2021.120813
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author Adedeji, Abdulkabir N.
Ahmed, Funmilola F.
Adam, Shehu U.
author_facet Adedeji, Abdulkabir N.
Ahmed, Funmilola F.
Adam, Shehu U.
author_sort Adedeji, Abdulkabir N.
collection PubMed
description Emergence of COVID-19 pandemic in China hit oil prices most, traded at a negative for the first time ever in the international oil market. In this paper, we examine the dynamic effect on four major oil prices of COVID-19 with reference to China and Nigeria. We use daily frequency data, and employ structural vector autoregressive method for the analysis. We find that the impact of COVID-19 pandemic accounted for smallest shares of movement in Bonny and Daqing oil prices, only 14% in China's Daqing and 17% in Nigeria’ Bonny, and the effect is even weaker on BRENT and WTI, 7% on each price as forecast error parameters indicate. This shows that the impact of infections of COVID-19 can short-lived and leave a minimal impact on economies, but the reaction of the market itself is subject matter. Thus, it is predicted that oil prices are likely to rise in future weeks as oil demand and major economies are expected to fully open and quickly recover. China may need to take advantage of the present low oil price to benefit its economy, while Nigeria may need to be careful in external borrowing binge embarked on to cushion the effect of oil price falls as it may debt-trap the economy.
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spelling pubmed-97619332022-12-19 Examining the dynamic effect of COVID-19 pandemic on dwindling oil prices using structural vector autoregressive model Adedeji, Abdulkabir N. Ahmed, Funmilola F. Adam, Shehu U. Energy (Oxf) Article Emergence of COVID-19 pandemic in China hit oil prices most, traded at a negative for the first time ever in the international oil market. In this paper, we examine the dynamic effect on four major oil prices of COVID-19 with reference to China and Nigeria. We use daily frequency data, and employ structural vector autoregressive method for the analysis. We find that the impact of COVID-19 pandemic accounted for smallest shares of movement in Bonny and Daqing oil prices, only 14% in China's Daqing and 17% in Nigeria’ Bonny, and the effect is even weaker on BRENT and WTI, 7% on each price as forecast error parameters indicate. This shows that the impact of infections of COVID-19 can short-lived and leave a minimal impact on economies, but the reaction of the market itself is subject matter. Thus, it is predicted that oil prices are likely to rise in future weeks as oil demand and major economies are expected to fully open and quickly recover. China may need to take advantage of the present low oil price to benefit its economy, while Nigeria may need to be careful in external borrowing binge embarked on to cushion the effect of oil price falls as it may debt-trap the economy. Elsevier Ltd. 2021-09-01 2021-05-11 /pmc/articles/PMC9761933/ /pubmed/36568912 http://dx.doi.org/10.1016/j.energy.2021.120813 Text en © 2021 Elsevier Ltd. All rights reserved. Since January 2020 Elsevier has created a COVID-19 resource centre with free information in English and Mandarin on the novel coronavirus COVID-19. The COVID-19 resource centre is hosted on Elsevier Connect, the company's public news and information website. Elsevier hereby grants permission to make all its COVID-19-related research that is available on the COVID-19 resource centre - including this research content - immediately available in PubMed Central and other publicly funded repositories, such as the WHO COVID database with rights for unrestricted research re-use and analyses in any form or by any means with acknowledgement of the original source. These permissions are granted for free by Elsevier for as long as the COVID-19 resource centre remains active.
spellingShingle Article
Adedeji, Abdulkabir N.
Ahmed, Funmilola F.
Adam, Shehu U.
Examining the dynamic effect of COVID-19 pandemic on dwindling oil prices using structural vector autoregressive model
title Examining the dynamic effect of COVID-19 pandemic on dwindling oil prices using structural vector autoregressive model
title_full Examining the dynamic effect of COVID-19 pandemic on dwindling oil prices using structural vector autoregressive model
title_fullStr Examining the dynamic effect of COVID-19 pandemic on dwindling oil prices using structural vector autoregressive model
title_full_unstemmed Examining the dynamic effect of COVID-19 pandemic on dwindling oil prices using structural vector autoregressive model
title_short Examining the dynamic effect of COVID-19 pandemic on dwindling oil prices using structural vector autoregressive model
title_sort examining the dynamic effect of covid-19 pandemic on dwindling oil prices using structural vector autoregressive model
topic Article
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9761933/
https://www.ncbi.nlm.nih.gov/pubmed/36568912
http://dx.doi.org/10.1016/j.energy.2021.120813
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