IDEAS home Printed from https://ideas.repec.org/a/eee/energy/v341y2025ics0360544225049837.html

Energy security and economic growth: The role of geopolitical tensions

Author

Listed:
  • Alam, Khandaker Jahangir
  • Nakhaee, Aida Ashtari
  • Yilmazkuday, Hakan

Abstract

This paper investigates the effects of energy security risks on economic growth, with a special focus on the role of geopolitical tensions. Using the local projections method on annual data from 75 countries between 1980 and 2018, we find that energy security risks have a negative and statistically significant impact on economic growth, especially in the short run. During periods of high geopolitical tension, these negative effects are significantly amplified, particularly for emerging markets and developing economies. We also find that the impact of energy security shocks differs based on national energy profiles, with net energy exporters and fossil fuel-dependent nations showing distinct vulnerabilities. An analysis of risk subcategories reveals that price volatility, energy use intensity, and transportation sector risks are key drivers of these negative economic outcomes. Policy suggestions to mitigate these risks follow.

Suggested Citation

  • Alam, Khandaker Jahangir & Nakhaee, Aida Ashtari & Yilmazkuday, Hakan, 2025. "Energy security and economic growth: The role of geopolitical tensions," Energy, Elsevier, vol. 341(C).
    • Handle: RePEc:eee:energy:v:341:y:2025:i:c:s0360544225049837
    DOI: 10.1016/j.energy.2025.139341
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0360544225049837
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.energy.2025.139341?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Dario Caldara & Matteo Iacoviello, 2022. "Measuring Geopolitical Risk," American Economic Review, American Economic Association, vol. 112(4), pages 1194-1225, April.
    2. Pata, Ugur Korkut & Alola, Andrew Adewale & Erdogan, Sinan & Kartal, Mustafa Tevfik, 2023. "The influence of income, economic policy uncertainty, geopolitical risk, and urbanization on renewable energy investments in G7 countries," Energy Economics, Elsevier, vol. 128(C).
    3. Tayyab Ayaz, Muhammad & Prodromou, Tina & Le, Thanh & Nepal, Rabindra, 2024. "Energy security dimensions and economic growth in Non-OECD Asia: An analysis on the role of institutional quality with energy policy implications," Energy Policy, Elsevier, vol. 188(C).
    4. Hakan Yilmazkuday, 2024. "Drivers of international fiscal spillovers," Economics and Politics, Wiley Blackwell, vol. 36(3), pages 1491-1536, November.
    5. Regis Barnichon & Christian Brownlees, 2019. "Impulse Response Estimation by Smooth Local Projections," The Review of Economics and Statistics, MIT Press, vol. 101(3), pages 522-530, July.
    6. Lee, Chien-Chiang & Yuan, Zihao & He, Zhi-Wen & Xiao, Fu, 2024. "Do geopolitical risks always harm energy security? Their non-linear effects and mechanism," Energy Economics, Elsevier, vol. 129(C).
    7. Barış Soybilgen & Huseyin Kaya & Dincer Dedeoglu, 2019. "Evaluating the effect of geopolitical risks on the growth rates of emerging countries," Economics Bulletin, AccessEcon, vol. 39(1), pages 717-725.
    8. Asif, M. & Muneer, T., 2007. "Energy supply, its demand and security issues for developed and emerging economies," Renewable and Sustainable Energy Reviews, Elsevier, vol. 11(7), pages 1388-1413, September.
    9. Yilmazkuday, Hakan, 2024. "Geopolitical risks and energy uncertainty: Implications for global and domestic energy prices," Energy Economics, Elsevier, vol. 140(C).
    10. Cohen, Stuart M. & Caron, Justin, 2018. "The economic impacts of high wind penetration scenarios in the United States," Energy Economics, Elsevier, vol. 76(C), pages 558-573.
    11. Alan J. Auerbach & Yuriy Gorodnichenko, 2013. "Corrigendum: Measuring the Output Responses to Fiscal Policy," American Economic Journal: Economic Policy, American Economic Association, vol. 5(3), pages 320-322, August.
    12. Li, Yinan & Huang, Yuxin, 2023. "Enhancing resources efficiency: Studying economic development in resource-rich regions for long-term sustainability of China," Resources Policy, Elsevier, vol. 86(PA).
    13. W. W. Rostow, 1959. "The Stages Of Economic Growth," Economic History Review, Economic History Society, vol. 12(1), pages 1-16, August.
    14. Goshu Desalegn & Anita Tangl & Maria Fekete-Farkas, 2022. "From Short-Term Risk to Long-Term Strategic Challenges: Reviewing the Consequences of Geopolitics and COVID-19 on Economic Performance," Sustainability, MDPI, vol. 14(21), pages 1-22, November.
    15. Maria Rosaria Mauro, 2024. "Energy Security, Energy Transition, and Foreign Investments: An Evolving Complex Relationship," Laws, MDPI, vol. 13(4), pages 1-21, July.
    16. Shiva S. Makki & Agapi Somwaru, 2004. "Impact of Foreign Direct Investment and Trade on Economic Growth: Evidence from Developing Countries," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(3), pages 795-801.
    17. Omid Asadollah & Linda Schwartz Carmy & Md. Rezwanul Hoque & Hakan Yilmazkuday, 2024. "Geopolitical risk, supply chains, and global inflation," The World Economy, Wiley Blackwell, vol. 47(8), pages 3450-3486, August.
    18. Hamilton, James D, 1983. "Oil and the Macroeconomy since World War II," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 228-248, April.
    19. Du, Juntao & Gu, Hongwei & Shen, Zhiyang & Song, Malin & Vardanyan, Michael, 2024. "Assessing regional energy security characteristics: Evidence from Chinese province-level data," Energy Economics, Elsevier, vol. 140(C).
    20. Iyke, Bernard Njindan, 2024. "Climate change, energy security risk, and clean energy investment," Energy Economics, Elsevier, vol. 129(C).
    21. Xie, Qichang & Bai, Dingchuan & Cong, Xiaoping, 2022. "Modeling the dynamic influences of economic growth and financial development on energy consumption in emerging economies: Insights from dynamic nonlinear approaches," Energy Economics, Elsevier, vol. 116(C).
    22. Qiang Wang & Fen Ren & Rongrong Li, 2024. "Geopolitics and energy security: a comprehensive exploration of evolution, collaborations, and future directions," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 11(1), pages 1-26, December.
    23. Cole, Matthew A. & Elliott, Robert J.R. & Occhiali, Giovanni & Strobl, Eric, 2018. "Power outages and firm performance in Sub-Saharan Africa," Journal of Development Economics, Elsevier, vol. 134(C), pages 150-159.
    24. Omer, Abdeen Mustafa, 2008. "Energy, environment and sustainable development," Renewable and Sustainable Energy Reviews, Elsevier, vol. 12(9), pages 2265-2300, December.
    25. Costa-Campi, M.T. & Duch-Brown, N. & García-Quevedo, J., 2014. "R&D drivers and obstacles to innovation in the energy industry," Energy Economics, Elsevier, vol. 46(C), pages 20-30.
    26. Khan, Khalid & Khurshid, Adnan & Cifuentes-Faura, Javier, 2023. "Energy security analysis in a geopolitically volatile world: A causal study," Resources Policy, Elsevier, vol. 83(C).
    27. Saakshi Jha & Sunny Bhushan & Nupur Nirola, 2024. "Is geopolitical risk always detrimental to economic growth?," Economic Change and Restructuring, Springer, vol. 57(2), pages 1-31, April.
    28. Le, Thai-Ha & Nguyen, Canh Phuc, 2019. "Is energy security a driver for economic growth? Evidence from a global sample," Energy Policy, Elsevier, vol. 129(C), pages 436-451.
    29. Taghizadeh-Hesary, Farhad & Rasoulinezhad, Ehsan & Yoshino, Naoyuki, 2019. "Energy and Food Security: Linkages through Price Volatility," Energy Policy, Elsevier, vol. 128(C), pages 796-806.
    30. Witajewski-Baltvilks, Jan & Verdolini, Elena & Tavoni, Massimo, 2017. "Induced technological change and energy efficiency improvements," Energy Economics, Elsevier, vol. 68(S1), pages 17-32.
    31. Dagar, Vishal & Dagher, Leila & Rao, Amar & Doytch, Nadia & Kagzi, Muneza, 2024. "Economic policy uncertainty: Global energy security with diversification," Economic Analysis and Policy, Elsevier, vol. 82(C), pages 248-263.
    32. Battaglini, Fabian, 2024. "Will the European Green Deal enhance Europe’s security towards Russia? A political economy perspective," Energy Economics, Elsevier, vol. 134(C).
    33. Banna, Hasanul & Alam, Ashraful & Chen, Xihui Haviour & Alam, Ahmed W., 2023. "Energy security and economic stability: The role of inflation and war," Energy Economics, Elsevier, vol. 126(C).
    34. Blum, Helcio & Legey, Luiz F.L., 2012. "The challenging economics of energy security: Ensuring energy benefits in support to sustainable development," Energy Economics, Elsevier, vol. 34(6), pages 1982-1989.
    35. Apergis, Nicholas & Fahmy, Hany, 2024. "Geopolitical risk and energy price crash risk," Energy Economics, Elsevier, vol. 140(C).
    36. Bettarelli, Luca & Furceri, Davide & Pizzuto, Pietro & Yarveisi, Khatereh, 2024. "Regional fiscal spillovers: The role of trade linkages," Journal of International Money and Finance, Elsevier, vol. 140(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Fan, Yi & Chang, Tsangyao & Ranjbar, Omid, 2024. "Energy security and energy mix diversification nexus in the OECD countries," Economic Analysis and Policy, Elsevier, vol. 84(C), pages 2071-2085.
    2. Cao, Jie & Zhu, Yingxin & Yin, Zhujia & Li, Jing & Chang, Chun-Ping, 2025. "Resilience of energy market under geopolitical risks: What’s the policy implications?," Economic Analysis and Policy, Elsevier, vol. 86(C), pages 1706-1724.
    3. Yang, Shaopeng & Fu, Yuxi, 2025. "Interconnectedness among supply chain disruptions, energy crisis, and oil market volatility on economic resilience," Energy Economics, Elsevier, vol. 143(C).
    4. Zhao, Xin & Zhai, Guoqing & Nasim, Asma & Ma, Xiaowei, 2025. "Geopolitical risks, trade openness, and energy security: Empirical evidence from 41 countries," Energy Economics, Elsevier, vol. 149(C).
    5. Dong, Kangyin & Yang, Senmiao & Wang, Jianda & Nepal, Rabindra & Jamasb, Tooraj, 2024. "Does Geopolitical Risk Accelerate Climate Vulnerability? New Evidence from the European Green Deal," Working Papers 15-2024, Copenhagen Business School, Department of Economics.
    6. Yilmazkuday, Hakan, 2026. "International spillover effects of geopolitical risks on economic growth," Finance Research Letters, Elsevier, vol. 92(C).
    7. Banna, Hasanul & Alam, Ashraful & Chen, Xihui Haviour & Alam, Ahmed W., 2023. "Energy security and economic stability: The role of inflation and war," Energy Economics, Elsevier, vol. 126(C).
    8. Halder, Abhishek & Kannadhasan, M., 2025. "Energy uncertainty and corporate bankruptcy risk: International evidence," Energy Economics, Elsevier, vol. 151(C).
    9. Peng, Shiguang & Wang, Le & Chen, Yongyao, 2025. "The survival of global energy imports and the impact of geopolitical risks," Energy Economics, Elsevier, vol. 147(C).
    10. Ye, Shiqi & Zhang, Hongyin & Zhou, Mo & Zheng, Tingguo, 2025. "Assessing energy sector resilience to adverse shocks: A scenario-based QVAR approach," Energy Economics, Elsevier, vol. 149(C).
    11. Hille, Erik & Angerpointner, Cian, 2025. "Did geopolitical risks in supplier countries of fossil fuels lead to reduced domestic energy consumption? Evidence from Europe," Energy Policy, Elsevier, vol. 198(C).
    12. Du, Juntao & Gu, Hongwei & Shen, Zhiyang & Song, Malin & Vardanyan, Michael, 2024. "Assessing regional energy security characteristics: Evidence from Chinese province-level data," Energy Economics, Elsevier, vol. 140(C).
    13. Vo, Duc Hong & Ho, Chi Minh & Lang, Ngoc Duc, 2025. "Greener for greater security? The role of green finance in energy security amid rising geopolitical risks," Energy Economics, Elsevier, vol. 151(C).
    14. Huang, Zhuo & Ye, Chengfang & Lai, Fujun & Li, Yunzhong & Li, Xiaofan, 2024. "Dancing between threats and conflicts: How Chinese energy companies invest amidst global geopolitical risks," Energy Economics, Elsevier, vol. 139(C).
    15. Dao, Thuy & Awijen, Haithem & Ahmed, Rizwan & Ameur, Hachmi Ben, 2025. "Understanding energy security in geopolitical contexts: Insights from decomposing energy diversification indexes," Energy Economics, Elsevier, vol. 152(C).
    16. Ha, Le Thanh, 2025. "From wars to dynamic waves: Scrutinizing connectedness between geopolitical risk index, green and non-green crypto volatility by quantile spillovers," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 679(C).
    17. Opoku, Eric Evans Osei & Acheampong, Alex O. & Frempong, Josephine, 2025. "Geopolitical risks, financial system and the energy trilemma," Energy Economics, Elsevier, vol. 149(C).
    18. Ullah, Sana & Gozgor, Giray & Lu, Zhou, 2024. "How do conflicts affect energy security risk? Evidence from major energy-consuming economies," Economic Analysis and Policy, Elsevier, vol. 82(C), pages 175-187.
    19. Han, Lin & Ning, Depeng & Xin, Shiguan, 2026. "Geopolitical risk and economic growth: Evidence from ASEAN countries," Finance Research Letters, Elsevier, vol. 88(C).
    20. Syed, Qasim Raza & Durani, Farah & Kisswani, Khalid M. & Alola, Andrew Adewale & Siddiqui, Aaliyah & Anwar, Ahsan, 2024. "Testing natural resource curse hypothesis amidst geopolitical risk: Global evidence using novel Fourier augmented ARDL approach," Resources Policy, Elsevier, vol. 88(C).

    More about this item

    Keywords

    ;
    ;
    ;

    JEL classification:

    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:energy:v:341:y:2025:i:c:s0360544225049837. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/energy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.