the effect of economic policy uncertainty on oil prices (case study: opec countries)

In this paper, we investigate the relationship between the economic policy uncertainty (epu) and oil prices in opec countries utilizing a nonparametric panel data model to allow the data to outfitter the shape of functional form. the change in oil price reflects the changes in fundamental and non-fundamental factors. using yearly data from opec countries from 2003 to 2017, we find that epu has a positive and significant effect on price. the research findings show renewable energies, oil price expectations, and epu are the most influential factors, respectively. so policymakers should devote more attention to fundamental aspects. the planning and establishment of the necessary infrastructure for the extensive use of renewable energies will lead to a significant reduction in oil prices. although the research findings indicate that renewable energy and oil are substitutes, oil and gas will continue to grow in the decades ahead. also, the rise in the epu will lead to an increase in oil prices. in this regard, policy authorities try to mitigate the adverse effects of oil price increases, which in turn reduces the success of those policies and causes an increment in economic policy uncertainty.