Assessing energy sector resilience to adverse shocks: A scenario-based QVAR approach

Shiqi Ye, Hongyin Zhang, Mo Zhou and Tingguo Zheng

Energy Economics, 2025, vol. 149, issue C

Abstract: Global energy sectors face heightened uncertainty due to effects of major global events, volatile energy prices, and geopolitical risks. To better understand how these factors affect energy sectors, this paper examines 14 key energy sectors worldwide, analyzing their resilience to shocks from oil, natural gas, and coal prices over the sample period from January 2006 to August 2024. Specifically, we propose a scenario-based approach based on QVAR model to measure time-varying resilience from the perspectives of intensity and duration. Additionally, we explore how economic policy uncertainty (EPU), geopolitical risks (GPR) and market volatility (VIX) influence energy sectors’ resilience. Results show that the resilience indices effectively capture the energy sector’s ability to withstand extreme shocks. Major events like Russia–Ukraine conflict and COVID-19 pandemic significantly alter both intensity and duration of resilience. Influence factor analysis reveals that increases in EPU, GPR, and VIX weaken resilience by reducing intensity and increasing duration, with the most pronounced impact observed in the sharp price fluctuations of oil and gas driven by rising GPR. The findings provide timely insights for policy adjustments to stabilize energy markets and guide investment strategies to mitigate potential risks.

Keywords: Energy sector resilience; Adverse shocks; Scenario-based analysis; Geopolitical risk (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:149:y:2025:i:c:s0140988325005602

DOI: 10.1016/j.eneco.2025.108733

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