Risk perception and oil and gasoline markets under COVID-19

https://doi.org/10.1016/j.jeconbus.2020.105979Get rights and content

Highlights

  • COVID-19 has caused a great uncertainty about health and economy.

  • Measure oil and gasoline market implications of individuals’ behavior upon such uncertainty.

  • COVID-19 related Google search volume reflects one's level of concern or risk perception.

  • Gasoline markets are affected negatively, while oil markets are unaffected.

Abstract

The novel coronavirus (COVID-19) exposed individuals to a great uncertainty about its health and economic ramifications, especially in the early days and weeks of the outbreak. This study documents oil and gasoline market implications of individuals’ behavior upon such uncertainty by analyzing the relationship between Google search queries related to COVID-19—information search that reflects one's level of concern about the subject (risk perception)—and the performance of oil and gasoline markets during the pandemic. The empirical analysis based on daily data and a structural vector autoregressive model reveals that a unit increase in the popularity of COVID-19 related global search queries, after controlling for COVID-19 cases, results in 0.083% and 0.104% of a cumulative decline in Dow Jones US Oil & Gas Total index and New York Harbor Conventional Gasoline Regular spot price, respectively, after one day, 0.189% and 0.234% of a cumulative decline after one week, and 0.191% and 0.237% of a cumulative decline after two weeks. The reaction of Brent and West Texas Intermediate crude oil prices to the spike in COVID-19 related online searches is found to be statistically insignificant, which can be explained by oil price pass-through into gasoline spot price.

JEL classification

G15
I10
Q41
Q43

Keywords

Coronavirus
Google Trends
Risk perception
Oil prices
Gasoline prices
Energy markets

Cited by (0)

The authors are grateful to an anonymous referee and the editor, Hakan Yilmazkuday, for thoughtful comments and suggestions. This work was supported by the UAES at Utah State University. Declarations of interest: none.

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