The Unassuming Economist

From a paper by Shuang Wang, Yan Wang, and Jing Li:

“Crude oil is a critical resource for modern industrialized societies and is heavily affected by geopolitical factors. However, existing studies on oil security assessment often overlook the interdependence among evaluation indicators and dimensions, leading to biased estimations. Furthermore, few studies have examined the varying impacts of geopolitical risks on oil security, ignoring potential heterogeneous impacts. To address these gaps, we propose a novel analytical framework. First, we introduce an innovative approach to evaluate oil security using a refined multi-level nested copula, which captures the dependence structure among indicators and dimensions. Second, we employ copula functions to explore how geopolitical risks affect a nation’s oil security and uncover their transmission channels. Empirical analysis using data from China shows that geopolitical risks significantly weaken oil security, with a symmetric tail dependence between them, indicating consistent effects regardless of geopolitical fluctuations. Moreover, we identify diminishing supply security as the primary pathway through which geopolitical risks impact oil security. These findings offer valuable policy insights for strengthening energy security amidst geopolitical uncertainties.”