The Economic Shockwaves of the Russia-Ukraine Conflict and Energy Sources Prices – The Impact on International Energy Markets

Abstract

The Russia-Ukraine conflict has raised concerns regarding the stability of the global energy sector, considering that Russia is a big player in the industry, producing and exporting crude oil and natural gas globally. This study aimed to empirically investigate the impact of the conflict on the prices of energy sources in international markets. The analysis was conducted using secondary data. The data was for prices of various commodity products, including diesel, petroleum, natural gas, and crude oil. The data was collected on multiple international markets for periods from January 1, 2021 to November 30, 2023. The analysis was conducted using trend analysis and event study. The capital asset pricing model (CAPM) was adopted to run the event study analysis. The results indicated that immediately after the Russian invasion of Ukraine, major energy products such as US crude oil, European crude oil, and the global energy index experienced a sharp rise in price, followed by significant price volatility over the following up to seven months. The review of OPEC energy prices also indicated an increase in prices, and volatility was experienced in countries producing and exporting oil products. The event study further revealed that there was a sharp increasing trend immediately after the event date and an upward trend for more than ten months after the event, resulting in the highest prices recorded in the event window. The study suggested three policy implications - conflict should serve as a wake-up call on diversification of energy sources, investment in alternative, sustainable and green sources of energy to reduce the dependence on