Close ties: How trade dynamics and environmental regulations shape international dependence on oil

The European Union's reliance on imported fossil fuels, especially oil, has been highlighted by the energy crisis triggered by the war in Ukraine, exposing vulnerabilities in energy security. This study examines the drivers of international oil dependency, emphasising technological and trade lock-ins. Employing complex network theory and panel data models, it evaluates trade patterns and the effectiveness of environmental policies in mitigating oil dependency across EU countries from 1999 to 2019. Results indicate that trade lock-ins deepen dependency, especially for countries with strong geopolitical ties to major oil exporters. Stringent environmental policies, including energy taxes and technology-push initiatives, are shown to facilitate the ecological transition, with public R&D investments in renewable energy technologies playing a pivotal role. Countries with a comparative advantage in low-carbon technology exports benefit most from such investments. Importantly, no evidence supports the green paradox, confirming that well-designed policies can harmonise decarbonization and economic stability. The findings underscore the need for EU-wide strategies to address disparities in energy dependency. Recommendations include increasing public investment in clean energy innovation, diversifying energy imports, and fostering intra-EU collaboration to capitalise on renewable technology export potential. • Network analysis and econometrics are used to study oil trade dynamics. • Our study highlights trade lock-in as a key factor driving oil dependency. • Environmental policies show mixed effects on oil import reliance. • Eco-innovation can reduce dependence in countries with clean tech advantages.