The Effect of Oil Price Uncertainty on the Joint Default Risk of Oil and Natural Gas Companies

This study examines the predictive power of oil price uncertainty (OPU) in forecasting systemic default risk for U.S. oil and natural gas companies. Both in-sample and out-of-sample analyses demonstrate that OPU significantly enhances default probability forecasts, outperforming traditional macroeconomic factors. This predictive strength is consistent across various OPU proxies, especially over longer time horizons. The findings emphasize the importance of incorporating OPU into financial risk models to achieve greater accuracy and reliability.