The Effects of Energy Prices on Agricultural Groundwater Extraction from the High Plains Aquifer

Lisa Pfeiffer and C.-Y. Cynthia Lin Lawell

American Journal of Agricultural Economics, 2014, vol. 96, issue 5, 1349-1362

Abstract: We examine the effects of energy prices on groundwater extraction using an econometric model of a farmer's irrigation water pumping decision that accounts for both the intensive and extensive margins. Our results show that energy prices have an effect on both types of margins. Increasing energy prices would affect crop selection decisions, crop acreage allocation decisions, and farmers' demand for water. Our estimated total marginal effect, which sums the effects on the intensive and extensive margins, suggests that a $1 per million btu increase in the energy price would decrease water extraction by an individual farmer by 5.89 acre-feet per year, a decrease of 3.6 percent of the average annual extraction rate. Our estimated elasticity of water extraction with respect to energy price is -0.26.

Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:oup:ajagec:v:96:y:2014:i:5:p:1349-1362.

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