Examining the patterns of disaggregate energy security risk and crude oil price: the USA scenario over 1970-2040

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 similar to 0.9. With a positive impact on oil price, the economic, geopolitical, and reliability perspectives of energy security risk exhibit respective elasticity of similar to 2.0, similar to 0.6, and similar to 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 (similar to-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.

Automated summary

In addition to the environmental disadvantages of fossil energy sources, energy security is still a significant concern for economic development and environmental sustainability. This study examines the influence of energy security and its components on crude oil prices, specifically in the United States, from 1970 to 2040. The results show that an increase in aggregate energy security risk leads to a similar 0.9 elasticity increase in crude oil prices. The economic, geopolitical, and reliability perspectives of energy security risk also have positive impacts on oil prices, with elasticities of similar to 2.0, similar to 0.6, and similar to 0.7, respectively. Conversely, an increase in environmental risk leads to a decline and an inelastic (similar to -1.5) change in crude oil prices, indicating the importance of a net zero future and the adoption of clean and alternative energy sources. Additionally, the study finds that crude oil prices respond positively to increased energy expenditures and negatively to increased electricity prices. These results have important policy implications.