The impact of global oil price shocks on China’s bulk commodity markets and fundamental industries

• Published in: Energy policy Vol. 66; pp. 32 - 41
• Main Authors: Zhang, Chuanguo, Chen, Xiaoqing
• Format: Journal Article
• Language: English
• Published: Kidlington Elsevier Ltd 01-03-2014; Elsevier; Elsevier Science Ltd
• Subjects: Aggregates; Applied sciences; Bulk commodity markets; Categories; China; China (People's Republic); Commodities; Commodity markets; Crude oil prices; Economic data; Economics; Energy; Energy economics; Energy policy; Exact sciences and technology; Fossil fuels and derived products; General aspects; General, economic and professional studies; Grain; Grains; Industry; Investors; Markets; Metals; Oil; Oil price volatility; Prices; Spillover effects; Studies; Volatility; China; China, People's Rep; Oil price volatility; Bulk commodity markets; Spillover effects
• ISSN: 0301-4215; 1873-6777
• DOI: 10.1016/j.enpol.2013.09.067

This paper investigated the reaction of aggregate commodity market to oil price shocks and also explored the effects of oil price shocks on China's fundamental industries: metals, petrochemicals, grains and oilfats. We separated the volatilities of oil price into expected, unexpected and negatively expected categories to identify how oil prices influence bulk commodity markets. We contrasted the results between different periods and among classified indices, in order to discover the significant changes in recent years and the differences at an industry level. Our results indicate that the aggregate commodity market was affected by both expected and unexpected oil price volatilities in China. The impact of unexpected oil price volatilities became more complex after 2007. The metals and grains indices did not significantly respond to the expected volatility in oil prices, in contrast to the petrochemicals and oilfats indices. These results not only contribute to advancing the existing literature, but also merit particular attention from policy makers and market investors in China.
•We investigated the impact of global oil price shocks on China’s bulk commodity markets and fundamental industries.•The aggregate commodity market was affected by both expected and unexpected oil price volatilities.•The impact of unexpected oil price volatilities became more complex after 2007.•The metals and grains indices did not significantly respond to the expected volatility in oil prices.