Dynamic determinants of price volatility across energy commodities: crude oil, natural gas, coal, and uranium markets

Jassim Aladwani

Journal of Economics, Finance and Administrative Science, 2026, vol. 31, issue 62, 289-313

Abstract: PurposeThis study aims to assess the effects of macro-level factors on forecasts of price volatility for crude oil, natural gas, coal, and uranium, and to identify the key factors influencing predictive models in order to enhance the accuracy and reliability of energy price forecasts.Design/methodology/approachThe study uses the Generalized Autoregressive Conditional Heteroskedasticity-Mixed Data Sampling (GARCH-MIDAS) model, combining factor selection techniques within a single modelling framework. This captures complex interdependencies among variables and improves analytical precision. In addition, the study incorporates the log likelihood function with an adaptive Least Absolute Shrinkage and Selection Operator (LASSO) penalty (ALASSO), providing robust estimation of volatility dynamics and causal relationships.FindingsThe model identified four key determinants that significantly influence West Texas Intermediate (WTI) crude oil price volatility – default-yield spread, financial market uncertainty, geopolitical risk uncertainty, and macroeconomic uncertainty. The three most informative determinants of natural gas price volatility are default-yield spread, financial market uncertainty, and macroeconomic uncertainty. Coal price volatility is primarily shaped by two determinants: demand and supply. Finally, uranium price volatility is largely determined by the demand factor and geopolitical risk uncertainty. The out-of-sample analysis further indicates that incorporating these variables significantly improves the prediction accuracy of all models compared with that of traditional baseline models.Originality/valueThe present analysis departs from previous studies, which typically exclude variables such as the industrial production index, crude oil demand and supply, and natural gas demand and supply, thereby suggesting that the previously reported influence of these factors may have been overstated. Uncertainty indices have proven to be robust and comprehensive predictors of market analysts and investors when assessing natural gas and crude oil price fluctuations and volatility. Accordingly, energy market participants are advised to focus on default yield spreads, financial market uncertainty, geopolitical risk uncertainty, and macroeconomic uncertainty to improve the overall efficiency of their risk management strategies. This focused approach is instrumental in refining decision-making processes during volatile market conditions.

Keywords: Energy markets; Volatility forecast; GARCH-MIDAS model; Macroeconomic uncertainty; Financial market uncertainty (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jefasp:jefas-10-2025-0389

DOI: 10.1108/JEFAS-10-2025-0389

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