Early Warning Systems for World Energy Crises

Abstract

Different severe energy crisis episodes have occurred in the world in the last five decades. Energy crises lead to the deterioration of international relations, economic crises, changes in monetary systems, and social problems in countries. This paper aims to show the essential determinants of energy crises by developing a binary logit model that estimates the predictive ability of thirteen indicators in a sample that covers the period from January 1973 to December 2022. The empirical results show that the energy crises are mainly due to energy supply–demand imbalances (petroleum stocks, fossil energy production–consumption imbalances, and changes in energy imports by countries), energy investments (oil and natural gas drilling activities), economic and financial disruptions (inflation, dollar indices, and indices of global real economic activity) and geopolitical risks. Additionally, the model is capable of accurately predicting world energy crisis events with a 99% probability.