Dynamic volatility transfer in the European oil and gas industry.

The study examines dynamic volatility transmissions among European energy industry participants along the production lines of Upstream, Midstream, Downstream, and Integrated Oil Gas (IOG) segments. Using Diebold-Yilmaz (2012, 2014) spillover index, during the sample period of October 2006 to June 2022, we find significant internal volatility spillover among the European energy sector participants, primarily emanating from Upstream companies. In subsamples, we show that Downstream and Midstream segments can also become volatility transmitters under certain conditions. More importantly, the large Russian IOG companies became significant volatility transmitters after 2022 with the onset of Russia's war on Ukraine, potentially causing major system instability because these IOG firms were traditionally volatility absorbers in the network. Overall, we provide insights about the interconnectedness among European energy companies during normal and extreme market conditions and highlight important system dynamics that could be useful for policy makers and investors. [Display omitted] • Comprehensive analysis of European energy companies listed on European stock exchanges from 2006 to 2022. • There is a significant volatility spillover among the energy sector participants, primarily emanating from Upstream firms. • In market turbulence Downstream and Midstream segments can also become volatility transmitters under certain conditions. • The total volatility spillover is time varying, with pronounced peaks during crisis periods. [ABSTRACT FROM AUTHOR]