Electricity prices and fuel costs: Long-run relations and short-run dynamics
AbstractThe paper examines the long-run relation and short-run dynamics between electricity prices and three fossil fuel prices - coal, natural gas and crude oil - using annual data for the U.S. for 1960-2007. The results suggest (1) a stable long-run relation between real prices for electricity and coal (2) Bi-directional long-run causality between coal and electricity prices. (3) Insignificant long-run relations between electricity and crude oil and/or natural gas prices. And (4) no evidence of asymmetries in the adjustment of electricity prices to deviations from equilibrium. A number of implications are addressed.
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Bibliographic InfoArticle provided by Elsevier in its journal Energy Economics.
Volume (Year): 31 (2009)
Issue (Month): 3 (May)
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Web page: http://www.elsevier.com/locate/eneco
Electricity prices Fuel costs Cointegration Error-correction model Asymmetric adjustment;
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