ARTICLE | Environmental Science and Pollution Research | Vol.29, 2022

Abstract

The aim of the study is to test the nexus between oil prices, energy risk exposer, and financial stability to recommend the implications for the period of COVID-19 crises. The study findings show that a systemic macroeconomic simulation that combines with the 17% oil prices and 26% energy risk exposure at household item demand gives a rise to energy subsidies at 18.14% and it contributes to make energy financing as efficient as 38.3% in study context. By this, the oil prices and energy risk exposure repercussions caused significant connection with financial stability. Utilization of oil-importing and oil-exporting economies necessitates the use of energy. Energy and capital are complementary in manufacturing. Following the study findings, we suggested and adjusted the energy risk exposure framework to take into account. The findings show that allocating oil price-related subsidy to enterprises yields the best policy results. However, the benefit to society as a whole is quite small. Additional analysis results indicate that in a less energy-dependent sector, having no subsidies would be the best strategy. On such benefits, different policy implications are also suggested for associated individuals to sustain financial stability.