Energy Security and Portfolio Diversification: Conventional and Novel Perspectives

Carlo Andrea Bollino () and Philipp Galkin
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Philipp Galkin: Visiting Energy Markets Program, KAPSARC, Riyadh 11672, Saudi Arabia

Energies, 2021, vol. 14, issue 14, 1-24

Abstract: Despite the recent expansion of the scope, the main pillars of energy security remain physical supply and price components. This paper highlights the novel developments of this notion, including the exporters’ perspective, relevant challenges, indicators, and policies. Furthermore, we apply the portfolio theory approach to five Gulf Cooperation Council countries to construct portfolios representing the trade-offs between maximizing returns (oil export growth or export prices) and minimizing risks (standard deviation of return variables). We assess portfolios’ resilience to external demand and logistical shocks by running several disruptive scenarios. We find that oil exporters adopt a balanced approach to the risks associated with export volume growth and pricing, which is different from some major oil importers that prioritize either the physical supply or price stability. Simulation scenarios of increasing oil exports to China would have a significant impact mainly on Saudi Arabia and the United Arab Emirates (UAE), but not on the others, while scenarios of reduced oil exports to the United States would impact mainly Saudi Arabia and Kuwait. A blockade of the Malacca Strait would reduce export volumes and increase portfolio risks for all five economies, with Kuwait and Oman most affected.

Keywords: oil exports; GCC countries; energy security; portfolio optimization; risk diversification (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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