The Oil Price and the Impact of Geopolitical Events and the VIX-index

Abstract: Abstract The spring of 2011 unrest grew in the Middle East and North Africa, and as a result we saw a surge in in oil prices. This essay conducts an evaluation on if these kinds of geopolitical events within the OPEC have affected the oil price in the past in the same way. As a contrary variable we have also assessed if the VIX-index is a good indicator of decreasing oil prices. We have used an approach where we compare Average Absolute Returns between periods of geopolitical events and the entire time period, and a linear regression study when looking at the affects of the VIX-index. We have selected a time period stretching from 1990:01.02 to 2009:12:31 and the data used is daily spot prices and quotes. Our results suggested that the geopolitical events do have a positive impact on the oil price, however this cannot be confirmed because of weak significance. The impact of the VIX-index cannot either be confirmed because of low significance and nor could sign of influence or correlation be found.