Cross-border systemic risk spillovers in the global oil system: Does the oil trade pattern matter?

This paper focuses on the cross-border systemic risk spillovers influenced by oil trade patterns in the global oil system, which show negative externalities from a country that encounters shocks due to oil-related risk events to other countries. To this end, we estimate the systemic risk spillovers among the oil sectors in 27 countries with a Gaussian graphical model for depicting interdependence among high-dimensional time series and characterize the oil trade pattern as a complex network. Furthermore, we investigate the influencing mechanism of bilateral oil trade and trade competition in the oil trade pattern on the international systemic risk spillovers with a panel logit model. Our empirical results suggest that both bilateral oil trade and import competition have a positive impact, while export competition has little effect. Moreover, risk spillovers induced by oil-related risk event shocks from Asian-Pacific countries are smaller than those from countries in North America and Europe. We also find that the effect of bilateral oil trade is much higher and more persistent than the effect of import competition across periods, whereas import competition has played an increasingly important role in driving risk spillovers since the 2014 oil price meltdown. This study contributes to the energy security of countries deeply engaged in the global energy market by providing novel insights into the relationship between oil trade patterns and intercountry systemic risk spillovers.

Automated summary

This research focuses on the impact of oil trade patterns on cross-border systemic risk spillovers, finding that bilateral oil trade and import competition have a positive effect on international systemic risk spillovers. Risks spillovers induced by oil-related risk events from Asian-Pacific countries are smaller compared to those from North America and Europe, and the influence of bilateral oil trade is higher and more persistent.