Economic Instability, Uncertainty, and Oil and Gas Companies’ Investment Behaviour and Risk Management

Abstract

This study investigates the role of economic instability, conceptualised as uncertainty, in shaping investment decisions and risk management practices within oil and gas firms. Adopting a mixed-methods design that combines panel data analysis with in-depth case examinations, the analysis demonstrates that elevated levels of uncertainty are associated with increasingly conservative investment behaviour. This is reflected in constrained capital spending and a strategic shift towards projects with shorter capital recovery horizons. In parallel, firms strengthen their risk management frameworks by expanding portfolio diversification, applying financial hedging instruments, and advancing digital transformation initiatives. However, the efficacy of these responses is not uniform and is significantly conditioned by firm-level characteristics, particularly ownership arrangements and technological capacity. Overall, the results provide meaningful implications for managers and policymakers aiming to enhance the adaptive capacity and resilience of the oil and gas industry under volatile economic environments.