Quantifying the influence of natural resources rent, financial development, and institutional quality on energy security risk

Abstract

Access to stable energy sources is crucial for sustaining economic development, providing public services, and safeguarding the wellbeing of individuals, making it a crucial component of national security and economic stability. Thus, an affordable and ample amount of energy is crucial for mitigating energy security risks. In this regard, a country needs to investigate the factors that can mitigate the risks related to energy security. The available literature on determinants related to energy security is limited. This research employs a novel cross-sectionally augmented autoregressive distributed lag model to examine the effects of natural resources rent, financial development, and institutional quality on energy security risk. The findings show that the natural resources rent, financial development, institutional quality index, voice and accountability, regulatory quality, political stability, government effectiveness, the rule of law, and control of corruption all help mitigate the energy security risk in the long run. In the short run, only financial development helps mitigate the energy security risks. The control variables of gross domestic product and trade increase the energy security risks, while the information and communications technology mitigates risks related to energy security in the long run. The findings help policymakers understand how the interaction of these factors helps reduce energy security risks.