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

Abstract

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, espe cially 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 se curity 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.