Dynamic price linkage of energies in transformation: Evidence from quantile connectedness

Chi-Wei Su, Xi Yuan, Muhammad Umar and Tsangyao Chang

Resources Policy, 2022, vol. 78, issue C

Abstract: The new energy technology brought by the fourth industrial revolution has stimulated the enthusiasm for energy transformation. However, unstable renewable energy brought by energy gaps stimulates the rise in the supply of traditional energy sources. While the energy supply situation is very complex in the epidemic and geopolitical conflicts, the road under energy transformation is facing security issues. We apply the quantile connectedness to uncover the price linkage between energy markets, further investigating energy prices' vulnerability to the global shocks in the ordinary and extreme markets. The size of the system spillover shock from (or to) energy markets is increased mainly in the extreme markets compared to the normal market. Under extreme fluctuations, oil-related energy sources become transmitters from the receivers, increasing the energy market's spillover risk. The risk spillover in the energy system is mainly concentrated on petroleum products. In the long run, the stability of the oil market is essential for energy security during the transformation process. Given the transmission of shocks across energy prices, especially in the highly favourable situation, has been highlighted that can spread to other energy markets, the government should increase the diversification of the energy supply.

Keywords: Energy transformation; Return spillover; Quantile connectedness; Energy market; Energy price linkage (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:78:y:2022:i:c:s0301420722003312

DOI: 10.1016/j.resourpol.2022.102886

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