Global energy security: Do internal and external risk spillovers matter? A multilayer network method

Abstract

The spillover effects in the risk networks of global energy firms within and among economies have brought increasing uncertainty to national energy security, which is largely unexplored in the existing literature. To this end, our study examines the shock transmission within and among 46 economies from January 2006 to June 2022, by employing a complex multilayer risk network based on a high-dimensional framework. Furthermore, this paper investigates the impact of risk contagion on energy security using panel data models. The findings reveal significant spillover effects within and among economies, which show a pronounced upward trend since the outbreak of the global financial crisis in 2008, COVID-19 in 2020, and the war in Ukraine in 2022. We further find that the two types of risk spillovers can negatively affect national energy security. In particular, domestic risk contagion effects dominate security risks of countries worldwide, whereas cross-border risk spillovers weaken security performance of energy-importing countries. Moreover, energy production and end-use energy price serve as two influencing mechanisms through which risk contagion affects security issues. The adverse impact of domestic contagion relies on two channels, but the cross-border spillovers induce security risk only via the price channel. Overall, this paper offers some suggestions for policy makers worldwide regarding energy security strategies to prevent or mitigate energy shock-induced negative externalities.