The Relationship Between Crude Oil Prices and Renewable Energy

Today's most used energy sources are Crude Oil, Gas, and Coal, which are the main reason for increasing CO2 and pollution in the atmosphere. In recent years, Climate change, Environment, Energy Security Issues, and the development of new technologies caused an enhanced focus on emissions and clean energy usage. These issues have been addressed through various international agreements, and different countries are putting some obligations on their industry to reduce the emission of greenhouse gasses. In order to decrease the dependency on fossil energies, investment and study on Renewable Energies have increased during the last years. Due to this continuous increase in using renewable energies, understanding their performance's effective parameters is very important. We expect that the Price of Crude Oil as one of the primary sources of energy and competitor of Clean Energies in different industries like transportation fuels, electricity, etc., has a significant influence on various aspects of Renewable Energies. This thesis aims to analyse the relationship between renewable energy stocks and the price of crude oil. In order to determine this relationship, I used a time-series approaches Vector Autoregressive Model (VAR), Vector Error Correction Model (VECM), and Structural Vector Autoregressive Model (SVAR). Besides, by conducting Impulse Response Test, I can analyse Renewable Energies Stocks' response to the different positive and negative oil price shocks and investigate whether these responses are asymmetric or symmetric. In the end, by comparing these models in two periods before the Covid-19 pandemic and post-pandemic, I looked at the effect of the global pandemic and the financial crisis caused by it on the relationship of oil price and renewable energies sectors. Sub-sectors of renewable energy are almost unaffected by shocks in Oil Prices. The results of my analysis indicate that the Global Covid-19 Pandemic has changed the under-consideration relationships. Furthermore, based on my findings, Crude oil is a net receiver of shocks from renewable energies. Also, the shock in Crude Oil Prices will mainly affect the Biofuel Index and its effect on other assets is not significant or dies out soon.