The efects of two benchmarks on Russian crude oil prices

This study analyzes the asymmetric effects of the price shocks of two global crude oil benchmarks (Dated Brent and Dubai) on three Russian crude oil prices: Urals, ESPO, and Sokol. The empirical evidence suggests that an increase in benchmark oil prices causes a rise in the selling prices of these Russian crude oil grades, and a drop in benchmarks decreases the prices. Russia has higher market power in North West Europe and the Mediterranean regions, while there is a more competitive market for Russian oils in Asia. Parallel to this, it is estimated that positive benchmark price shocks impact Urals crude oil grade sales prices more than negative ones in the North West Europe and Mediterranean markets. In contrast, negative benchmark price shocks impact ESPO and Sokol crude oil grade sales prices more than positive ones in the Asian markets. Russia’s main aim is to secure its oil revenues; hence, Russia can secure higher revenue by increasing oil prices more in a less competitive market than in a more competitive market. Additionally, the degree of asymmetry increases as the shock size rises. © 2022, The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature.