Does oil dependence cause energy risk?

Abstract

These days, the issue of energy risk is becoming more prevalent worldwide. Particularly, the issue of oil dependence raises awareness. The previous studies provide very limited background to this issue because of the absence of an energy risk variable. In this context, this study is a pioneer as it empirically assesses the effect of oil dependence on energy risk, a novel variable that has never been applied before, in 84 countries using annual data from 2000 to 2021. The estimations are conducted in the sample of the world and development stage, employing the Method of Moments Quantile Regression (MMQR), which allows us to estimate the impact of oil dependence on energy risk at various quantiles of energy risk. The findings reveal that dependence on oil resources leads to energy risk in the world and developing countries, whereas in developed countries oil dependence does not cause energy risk. We assume that developed countries, with their advanced technological capabilities and strong international collaboration, have adopted various alternative energy sources. Therefore, as policy implications, enhancing energy source diversification is suggested since dependence of energy consumption on various sources mitigates oil dependence, thus energy risk. Furthermore, we emphasize the significance of technological progress, as it determines the efficient and minimal use of energy resources and oil, both of which depend on the level of technological advancement. Furthermore, enhancing the involvement of international organizations in energy cooperation is crucial for managing effective energy distribution.