Structural Econometric Analysis of the Covid-19 Impacts on the Worldwide Petroleum Market based on the Evolutionary Amirkabir-De’es Petroleum Model

Abstract

Covid 19 disease has well demonstrated the expanse to which the health crisis can negatively affect the economic activities of petroleum-exporting countries. Experiential evidence confirms that worldwide petroleum prices and demand are two key channels for the disease to affect the economies of these countries. Due to the high significance of this issue, this study examines the effects of the Covid 19 disease on worldwide petroleum demand and the structure of the world petroleum market based on weekly data from Jun 14, 2000, to Jun 15, 2020. For this goal, the structural model of De’es et al. has been used, and the impact of this disease on the structure of demand and supply of petroleum in the short and long term has been studied. According to the results, it can be argued that Covid 19 disease from the worldwide crude petroleum price channel has a strong negative impact on the OPEC crude petroleum price index in the long run; Therefore, to avoid budget deficits and hyperinflation in OPEC countries, budgeting independent of petroleum revenues should be given serious attention by policymakers. Conventional petroleum models are not accurate in modeling global health crisis impacts on the oil market; the novelty of this paper is an evolutionary form of the De’es model of the petroleum market that can consider the demand-side shocks.