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Divergences in Long-Run Trends in the Prices of Energy and Energy Services

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  • Roger Fouquet

Abstract

This article presents new evidence on very long-run trends in the prices of energy and energy services, such as heat, power, transport, and light, using seven hundred years of data for the United Kingdom. The article has two main findings. First, it shows that, in general, there was an upward trend in average energy prices before the Industrial Revolution and a decline afterward, which was associated with the shift from traditional energy sources to fossil fuels. In the second half of the twentieth century, however, average energy prices did rise, reflecting not so much rising resource scarcity as greater value to consumers, as consumers shifted to energy sources that provided the desired services more efficiently. Second, the article highlights the dangers of focusing on the price of energy rather than the price of energy services when considering the long run. The price of energy ignores major technological improvements and their benefits to the consumer. This failure to focus on energy services is likely to lead to incorrect estimates of consumer responsiveness to changes in price and income. The article suggests that the inclusion of service prices and consumption variables would lead to more reliable models of long-run energy demand and forecasts of carbon dioxide emissions. ( Copyright 2011, Oxford University Press.

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Bibliographic Info

Article provided by Association of Environmental and Resource Economists in its journal Review of Environmental Economics and Policy.

Volume (Year): 5 (2011)
Issue (Month): 2 (Summer)
Pages: 196-218

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Handle: RePEc:oup:renvpo:v:5:y:2011:i:2:p:196-218

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Cited by:
  1. John Foster, 2014. "Energy, knowledge and economic growth," Journal of Evolutionary Economics, Springer, Springer, vol. 24(2), pages 209-238, April.
  2. Dirk-Jan van de Ven & Roger Fouquet, 2014. "Historical energy price shocks and their changing effects on the economy," Grantham Research Institute on Climate Change and the Environment Working Papers, Grantham Research Institute on Climate Change and the Environment 153, Grantham Research Institute on Climate Change and the Environment.
  3. Roger Fouquet, 2011. "The Demand for Environmental Quality in Driving Transitions to Low Polluting Energy Sources," Working Papers, BC3 2011-11, BC3.
  4. Roger Fouquet, 2013. "Long Run Demand for Energy Services: the Role of Economic and Technological Development," Working Papers, BC3 2013-03, BC3.
  5. Roger Fouquet, 2012. "Trends in Income and Price Elasticities of Transport Demand (1850-2010)," Working Papers, BC3 2012-01, BC3.
  6. Jouvet, Pierre-André & De Perthuis, Christian, 2012. "La croissance verte : de l’intention à la mise en oeuvre," Economics Papers from University Paris Dauphine, Paris Dauphine University 123456789/10234, Paris Dauphine University.
  7. Roger Fouquet & Peter J.G Pearson, 2011. "The Long Run Demand for Lighting: Elasticities and Rebound Effects in Different Phases of Economic Development," Working Papers, BC3 2011-06, BC3.
  8. Astrid Kander & David I. Stern, 2013. "Economic Growth and the Transition from Traditional to Modern Energy in Sweden," CAMA Working Papers, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University 2013-65, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.

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