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Fuel inventory and price relationships in the U.S. electric power sector under regulatory and market change

Author

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  • Kyle E. Binder

    (Federal Reserve Bank of Chicago)

  • James W. Mjelde

    (Texas A&M University)

Abstract

Long-run relationships among coal inventories at U.S. electric power plants, corporate bond rates and coal, natural gas, and electricity prices are estimated over the period July 1976 to October 2014. Tests for constancy of the long-run relationships show periods of instability which coincide with major regulatory events in the electric power sector. Deregulation of the natural gas and electricity markets are likely sources of instability for the period mid-1994 to mid-2001. Additionally, inventory behavior may have had a smoothing effect over instability caused by natural gas prices during the recent U.S. shale boom. Policy makers should be aware that altering the regulatory environment can result in considerable fluctuations in how firms’ inventory decisions interact with input and output markets and opportunity costs in the long run.

Suggested Citation

  • Kyle E. Binder & James W. Mjelde, 2017. "Fuel inventory and price relationships in the U.S. electric power sector under regulatory and market change," Journal of Regulatory Economics, Springer, vol. 51(2), pages 197-219, April.
    • Handle: RePEc:kap:regeco:v:51:y:2017:i:2:d:10.1007_s11149-017-9319-9
    DOI: 10.1007/s11149-017-9319-9
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    Cited by:

    1. Ohler, Adrienne & Mohammadi, Hassan & Loomis, David G., 2020. "Electricity restructuring and the relationship between fuel costs and electricity prices for industrial and residential customers," Energy Policy, Elsevier, vol. 142(C).
    2. Harald Ulrik Sverdrup & Anna Hulda Olafsdottir, 2020. "Conceptualization and parameterization of the market price mechanism in the WORLD6 model for metals, materials, and fossil fuels," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 33(3), pages 285-310, October.

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    More about this item

    Keywords

    Inventory behavior; Policy change; Electricity sector; VECM;
    All these keywords.

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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