Impact of fossil fuel prices on electricity prices in Mexico

Bruno Bernal, Juan Carlos Molero and Fernando Pérez de Gracia ()

Journal of Economic Studies, 2019, vol. 46, issue 2, 356-371

Abstract: Purpose - The purpose of this paper is to examine the impact of fossil fuel prices – crude oil, natural gas and coal – on different electricity prices in Mexico. The use of alternative variables for electricity price helps to increase the robustness of the analysis in comparison to previous empirical studies. Design/methodology/approach - The authors use an unrestricted vector autoregressive model and the sample covers the period January 2006 to January 2016. Findings - Empirical findings suggest that crude oil, natural gas and coal prices have a significant positive impact on electricity prices – domestic electricity rates – in Mexico in the short run. Furthermore, crude oil and natural gas prices have also a significant positive impact on electricity prices – commercial and industrial electricity rates. Originality/value - Two are the main contributions. First, this paper explores the nexus among crude oil, natural gas, coal and electricity prices in Mexico, while previous studies focus on the US, UK and some European economies. Second, instead of using one electricity price as a reference of national or domestic electricity sector, the analysis considers alternative Mexican electricity prices.

Keywords: Mexico; Unrestricted VAR; Electricity prices; Coal prices; Crude oil prices; Natural gas prices; C32; Q40; Q41 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:jespps:jes-07-2017-0198

DOI: 10.1108/JES-07-2017-0198

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