Study the Impacts of Covid-19 Pandemic on Oil Market in Iran and the Globe

Document Type : Research Article

Authors

1 Assistant Professor, Petroleum University of Technology

2 PhD in economics, Ferdowsi University of Mashhad

Abstract

The Covid-19 pandemic has well illustrated the extent to which the health crisis can negatively affect the economic activities of oil-exporting countries. Empirical evidence confirms that global oil prices and global demand for this commodity are the two key channels of the disease's impact on the economies of such countries. Given the high importance of this issue, this study examines the effects of this disease on US oil demand (as an indicator of world oil demand) and the West Texas price index (as an indicator of world oil prices), based on weekly data from June 14, 2019 to May 15, 2020. For this purpose, an autoregressive distributed lag model (ARDL) has been used, and thus the impact of Covid-19 on oil demand and the oil price index in both short-term and long-term has been studied. According to the findings of this study, Covid-19 had a negative and significant effect both in the long run and in the short run on the global oil price index and global oil demand. Also, regard to the results of the causality test based on the VECM model, a strong long-term causality from the global oil price index to the Iranian oil price has been confirmed. Therefore, it can be argued that Covid-19 has a strong negative impact on Iran's crude oil price index throughout affecting global crude oil price in the long run. Therefore, in order to avoid budget deficits and hyperinflation in Iran, oil-independent budget should be seriously considered by policy makers.

Keywords

References

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Journal of Applied Economics Studies in Iran
Volume 9, Issue 36
January 2021
Pages 183-209

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