Oil in the age of coronavirus: Hysteria or appropriate fall?

Abstract

We look at the oil price fall in the beginning of 2020 and the effects of coronavirus and the attention towards it on these prices. Such a fall was observed at multiple markets simultaneously with the spread of coronavirus and the panic around it, and oil market wasn’t an exception. Using OLS time series models, we investigate — what was the main reason behind such a fall — the coronavirus pandemic itself or rather the attention towards it. We prove the absence of straight effects of the COVID-19 itself on oil prices. At the same time we find significant negative impact of the attention towards COVID-19 on the Internet search on the oil prices. We investigate the role of the OPEC in mitigating the negative impact of coronavirus and the attention towards it. We found that after the OPEC summit both the number of Covid cases and the attention towards the disease lost its influence on oil prices. Our paper is relevant for the behavioral finance researchers, as well as for those who look at the influence of informational shocks on different markets and particularly, on the oil market and at the effect of the COVID-19 on the economy.