Historical energy price shocks and their changing effects on the economy

Dirk Jan van de Ven and Roger Fouquet

Energy Economics, 2017, vol. 62, issue C, 204-216

Abstract: The purpose of this paper is to identify the changes in the impact of energy shocks on economic activity — with an interest in assessing if an economy's vulnerability and resilience to shocks improved with economic development. Using data on the United Kingdom over the last three hundred years, the paper identifies supply, aggregate demand and residual shocks to energy prices and estimates their changing influence on energy prices and GDP. The results suggest that the impacts of supply shocks rose with its increasing dependence on coal, and declined with its partial transition to oil. However, the transition from exporting coal to importing oil increased the negative impacts of demand shocks. More generally, the results indicate that improvements in vulnerability and resilience to shocks did not progress systematically as the economy developed. Instead, the changes in impacts depended greatly on the circumstances related to the demand for and supply of energy sources. If these experiences are transferable to future markets, a transition to a diversified mix of renewable energy is likely to reduce vulnerability and increase resilience to energy price shocks.

Keywords: Energy prices; Long run; Economic impact; Supply shocks; Demand shocks (search for similar items in EconPapers)
JEL-codes: N53 N73 O33 Q43 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (36)

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Related works:
Working Paper: Historical energy price shocks and their changing effects on the economy (2017)
Working Paper: Historical energy price shocks and their changing effects on the economy (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:62:y:2017:i:c:p:204-216

DOI: 10.1016/j.eneco.2016.12.009

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