The Time-Varying Impact of Oil Price Changes on the Consumer Sector: Evidence from the Russia-Ukraine Conflict

Abstract

The impact of changes in oil prices has always had a more or less significant impact on various industries, often affecting the whole body, so the impact of oil price changes has been a hot topic of research. There is still a gap in the literature in terms of the statistically significant impact of oil price changes caused by the large-scale war between Russia and Ukraine, which radiates to the consumer sector. This paper collects WTI and Brent crude oil settlement prices, as well as consumption indices, from three months before the outbreak of the Russia-Ukraine conflict to the present. To achieve smoothness, a VAR model is built using the log-return series of the three data sets, and impulse response plot analysis concludes that there is indeed a significant correlation between the two crude oil prices and the consumption index. An ARMA-GARCH model was later developed to quantify the correlation and derive specific values for the volatility brought about by changes in the prices of the two crude oils on the consumer sector returns.