article · Resources Policy
Energy security components, spanning economic, geopolitical, reliability, and environmental dimensions, directly influence crude oil price patterns. An analysis of the United States context from 1970 to 2040 reveals that an increase in overall energy security risk elevates crude oil prices with an elasticity of roughly 0.9. Disaggregated risks in economic, geopolitical, and reliability categories each drive price hikes, with economic risk displaying the most pronounced upward pressure. In contrast, higher environmental risk leads to a drop in crude oil prices, pointing to the influence of alternative and clean energy adoption in moving towards net-zero goals. Across broader market dynamics, higher energy expenditure correlates with increased crude oil prices, whereas increases in retail electricity prices lead to a decline.
Understanding how distinct security risks shape oil prices clarifies the broader economic consequences of energy instability. By distinguishing between geopolitical, economic, and environmental factors, policymakers and industry analysts can better anticipate fuel price volatility. Crucially, the finding that environmental risk lowers oil prices underlines the market-shifting potential of transitioning towards clean and alternative energy sources.
The research offers analytical insights that can support energy market analysts, economic forecasters, and policy planners in modelling crude oil price movements under varying security conditions. As an empirical and econometric modelling study spanning past and projected data to 2040, the work remains at an early, analytical stage rather than providing a deployable commercial tool or product.
AI-generated from the published abstract. Always read the original work before citing.
Beyond the environmental drawback of fossil energy sources, energy security remains a salient concern for economic development and environmental sustainability. This explains why the influence of energy security and its components (economic, geopolitical, reliability, environmental) on the price of crude oil commodity, especially in the United States of America, is considered in this study up to the period 2040 (i.e., from 1970 to 2040). Using the Kernel-Based Regularized Least Squares (KRLS) approach supported by the robustness of the quantile regression, the result shows an increase in aggregate energy security risk spur crude oil price by an elasticity of ∼0.9. With a positive impact on oil price, the economic, geopolitical, and reliability perspectives of energy security risk exhibit respective elasticity of ∼2.0, ∼0.6, and ∼0.7, thus confirming that a positive shock in each aspect aggravates the oil price hike in the country. Contrarily, an increase in environmental risk could spiral a decline and an inelastic (∼−1.5) change in crude oil price, thus suggesting a desirable net zero future and a significant crash in oil price arising from clean and alternative energy source adoption. Furthermore, retail electricity price and energy expenditures are used as control variables, and crude oil prices respond positively and negatively to the increase in energy expenditures and electricity price, respectively. Several accounts of policy insights are highlighted in these results.
This page summarises published work. The authoritative version sits with the publisher.
DOI: 10.1016/j.resourpol.2023.103514
Is something wrong with this record? Report it or request removal.
Discussion
Have you built on this work, tried to replicate it, or seen it applied in practice? Share what you know. Verified researchers and MARATTO™ domain experts can open a discussion, and any member can reply. Contributions are reviewed before they appear.
No discussion yet. Open the first thread.
New to MARATTO™? Create a free account.
