Resilience of energy market under geopolitical risks: What’s the policy implications?
Cao, J. Zhu, Y. Yin, Z. Chang, C.-P.
Cao, J.
Zhu, Y.
Yin, Z.
Chang, C.-P.
Publication Date
2025-05-14
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© 2025 Elsevier. Reproduced in accordance with the publisher's self-archiving policy. This manuscript version is made available under the CC-BY-NC-ND license (https://creativecommons.org/licenses/by-nc-nd/4.0/)
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embargoedAccess
Accepted for publication
2025-05-06
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2026-11-14
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Abstract
This paper studies the global energy market under geopolitical risk shocks from a novel perspective of resilience. Using the time-varying parameter factor-augmented vector autoregressive model, we quantify resilience by measuring the absorption duration and the intensity from temporal and magnitude aspects. We describe the resilience of the energy market over time. Sub-market analysis shows that the oil market has a longer recovery period but higher absorption intensity than the natural gas and coal markets. We also observe that the energy market exhibits different resilience to geopolitical threats versus actual geopolitical events. Furthermore, we show that market resilience is significantly correlated with hedge ratios and market returns, underscoring the critical role of resilience in risk management. Our study highlights the importance of understanding and measuring market resilience, which provides valuable insights for policymakers and investors to enhance the security and robustness of energy markets.
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Accepted manuscript
Citation
Cao J, Zhu Y, Yin Z et al (2025) Resilience of energy market under geopolitical risks: What’s the policy implications? Economic Analysis and Policy. 86: 1706-1724.
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The full text will be available at the end of the publisher's embargo: 2026-11-14