Fuel inventory and price relationships in the U.S. electric power sector under regulatory and market change

Kyle E. Binder () and James W. Mjelde ()
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Kyle E. Binder: Federal Reserve Bank of Chicago
James W. Mjelde: Texas A&M University

Journal of Regulatory Economics, 2017, vol. 51, issue 2, No 4, 197-219

Abstract: Abstract Long-run relationships among coal inventories at U.S. electric power plants, corporate bond rates and coal, natural gas, and electricity prices are estimated over the period July 1976 to October 2014. Tests for constancy of the long-run relationships show periods of instability which coincide with major regulatory events in the electric power sector. Deregulation of the natural gas and electricity markets are likely sources of instability for the period mid-1994 to mid-2001. Additionally, inventory behavior may have had a smoothing effect over instability caused by natural gas prices during the recent U.S. shale boom. Policy makers should be aware that altering the regulatory environment can result in considerable fluctuations in how firms’ inventory decisions interact with input and output markets and opportunity costs in the long run.

Keywords: Inventory behavior; Policy change; Electricity sector; VECM (search for similar items in EconPapers)
JEL-codes: L23 L51 Q41 Q48 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s11149-017-9319-9

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