Geopolitical risk and the LNG-LPG trade

We explore the relationship between freight rates of Liquified Natural Gas (LNG) and Liquified Petroleum Gas (LPG) carrier freight rates, and the global geopolitical risk, while also controlling for the macro environment. Our results show that a shock in geopolitical risk significantly increases the cost of the spot charter rates for both the LNG and LPG carriers, with the impact reaching around 25% for the former and 18% for the latter. Our results bare significant implications for the companies and countries involved in the liquefied gas trade, as it is likely to continue substituting other fossil fuels in the future. As such, the significance of a stable energy source makes it highly correlated with the economic development and energy security in the importing countries.