Electricity prices and fuel costs: Long-run relations and short-run dynamics

Hassan Mohammadi

Energy Economics, 2009, vol. 31, issue 3, pages 503-509

Abstract: The 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.

Keywords: Electricity; prices; Fuel; costs; Cointegration; Error-correction; model; Asymmetric; adjustment (search for similar items in EconPapers)
Date: 2009

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Persistent link: http://EconPapers.repec.org/RePEc:eee:eneeco:v:31:y:2009:i:3:p:503-509

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