Tail risk connectedness in the refined petroleum market: A first look at the impact of the COVID-19 pandemic

This study provides a novel framework for analysing systematic tail risk transmission mechanisms by combining the Conditional Autoregressive Value-at-Risk (CAViaR) model with recently developed Time-Varying Parameter Vector (TVP-VAR) based connectedness approach. We estimate dynamic spillovers across two crude oil (Brent and WTI) four refined petroleum product (gasoline, heating oil, jet fuel propane) prices from January, 17, 1997 to December 11, 2020. Results show that, both kerosene are persistent net transmitters of shocks, signifying important role liquidity in relevant markets. In addition, either type appears shift around 2009 following developments energy market. Overall, our findings suggest total positively affected major crisis episodes that recent COVID-19 pandemic have potential propel exposure losses levels akin those Global Financial Crisis 2007–2008. • use CAViaR combination TVP-VAR transmission. The selected sample period covers first stage crisis. Connectedness rises episodes.