How do mobility restrictions and social distancing during COVID-19 affect the crude oil price?

TL;DR

This paper investigates how COVID-19 related mobility restrictions and social distancing measures impact crude oil prices using new mobility indices and advanced statistical models, revealing significant effects and potential for negative prices during pandemics.

Contribution

It introduces a novel air mobility index and applies quantile and extreme value models to analyze COVID-19's impact on oil prices, highlighting the potential for negative prices during pandemics.

Findings

Mobility indices significantly affect oil price quantiles.

COVID-19 can cause oil prices to turn negative.

Extreme value models predict drastic price drops during pandemics.

Abstract

We develop an air mobility index and use the newly developed Apple's driving trend index to evaluate the impact of COVID-19 on the crude oil price. We use quantile regression and stationary and non-stationary extreme value models to study the impact. We find that both the \textit{air mobility index} and \textit{driving trend index} significantly influence lower and upper quantiles as well as the median of the WTI crude oil price. The extreme value model suggests that an event like COVID-19 may push oil prices to a negative territory again as the air mobility decreases drastically during such pandemics.