2025/08/03 by Victoria Olushola Olanrewaju, Tomiwa Sunday Adebayo, Berna Uzun
Economics, Econometrics and Finance · Energy · #Market Dynamics and Volatility #Energy, Environment, Economic Growth #Energy, Environment, and Transportation Policies
paper · doi:10.1080/00036846.2025.2535552
Amidst a rapidly evolving energy landscape, understanding how ESG-driven sustainability risks reshape oil, heating oil, and natural gas prices is crucial for investors and policymakers charting a resilient path forward. Therefore, this study utilizes the recently developed ESG-based sustainability uncertainty index (ESGUI), which provides a crucial tool for assessing how ESG (environmental, social, governance) uncertainties are integrated into investment decisions. This research examines the impact of ESGUI on fossil fuel energy price volatility, using data from 2002:M11 to 2024:M9. Additionally, the study introduces wavelet cross-quantile regression to capture this relationship. The results show that ESGUI has a predominantly negative short-term impact on oil, heating oil, and natural gas prices, especially under bearish or moderately active market conditions. However, in the long term, ESG uncertainty tends to increase prices across all three fuels – reflecting market adjustments to regulatory risks, supply concerns, and hedging strategies. Based on these findings, the study formulates relevant policy recommendations.