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Time Relationships among Electricity and Fossil Fuel Prices: Industry and Households in Europe

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  • Mara Madaleno

    (GOVCOPP - Research Unit in Governance, Competitiveness and Public Policy and Department of Economics, Management and Industrial Engineering, University of Aveiro, Campus Universit rio de Santiago, 3810-193, Aveiro, Portugal,)

  • Victor Moutinho

    (CEFAGE Center of Advanced Studies in Management and Economics, University of vora, Portugal and Department of Economics, Management and Industrial Engineering University of Aveiro, Campus de Santiago, 3810-193, Aveiro, Portugal,)

  • Jorge Mota

    (Department of Economics, Management and Industrial Engineering, University of Aveiro Campus Universit rio de Santiago, 3810-193, Aveiro, Portugal.)

Abstract

Cointegration relationships among electricity, gas, oil and coal are explored using panel data models for both the industrial and household sectors in 22 countries in Europe between 1996 and 2013. A shorter period, to account for the allowances market creation in Europe is also considered through a dummy (2005-2013) to capture the absence and presence of the CO2 price effect respectively. Empirical findings reveal that electricity and fuel prices are non-stationary and cointegrated series. So, the current paper accounts for cross-section dependence when analyzing the electricity-fuel nexus. Results indicate that there exists a stronger long run equilibrium relationship between electricity prices and fuel prices in the industry sector, while both a short and long run equilibrium relationship in the household sector. These differences may be explained by the industry higher resilience in long run contracts within the energy sector and by the fact that households bear a larger share of the cost of taxes and levies.

Suggested Citation

  • Mara Madaleno & Victor Moutinho & Jorge Mota, 2015. "Time Relationships among Electricity and Fossil Fuel Prices: Industry and Households in Europe," International Journal of Energy Economics and Policy, Econjournals, vol. 5(2), pages 525-533.
    • Handle: RePEc:eco:journ2:2015-02-17
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Cointegration; Electricity and Fuel Markets; Industrial and Household Sectors;
    All these keywords.

    JEL classification:

    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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