Energy market uncertainty and the impact on the crude oil prices

Our paper proposes a novel measure of global energy market uncertainty and studies its impact on oil prices. The current literature primarily relies single or small number observable variables, general macroeconomic (JLN) economic policy (EPU) indices to reflect uncertainty. Using Factor Augmented Vector Autoregression model (FAVAR), we construct time-varying in data-rich environment. estimates show variations from JLN EPU proxies. results reveal that real prices respond strongly our proposed aggregate shocks. We also find heterogeneous responses different types magnitudes price is affected the most under unexpected strong demand for alternative sources scenario.