Impact of Crude Oil Price on the Political Environment of Crude Oil Consuming Countries

Abstract

The paper examines the crude oil price effects on the political environment of the top four crude oil-consuming countries. The study uses data from 2002 to 2017 to showcase the effect of crude oil price on political environment of crude oil-consuming countries. The study takes Voice and Accountability (VA), Political Stability and Absence of Violence/Terrorism (PS), Government Effectiveness (GE), Regulatory Quality (RQ), Rule of Law (RL) and Control of Corruption (CC) as potential determinants of the political environment. The results indicate that crude oil price has significantly affects USA (VA), China (VA), USA (PS), China (PS), Japan (PS), USA (GE), Japan (GE), USA (RQ), China (RQ), USA (RL), Japan (RL), USA (CC), and Japan (CC). An interesting observation from the result is that out of the top four crude oil-consuming countries, crude oil price mostly affects USA while least affecting India. The empirical finding in this study provides a new understanding of the relationship between crude oil prices and their effect on the political environment.