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Oil Shocks and the Demand for Electricity

Abstract:
This paper uses a Structural Econometric Model - Time Series Analysis to forecast the demand for electricity in the United States. The main innovation is to incorporate price shocks for oil into the model. The results show that if forecasts had been made with this model in the mid-1970s, they would have predicted the drop in the growth of demand more promptly than did the electric utility industry forecasts. Using current data, forecasts of demand for the year 2000 from the model are higher than industry forecasts, suggesting a reversal of the situation that existed in the 1970s.

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Energy Specializations: Petroleum – Markets and Prices for Crude Oil and Products; Energy Security and Geopolitics – Geopolitics of Energy; Electricity – Markets and Prices

JEL Codes:
L13 - Oligopoly and Other Imperfect Markets
Q48 - Energy: Government Policy
D42 - Market Structure, Pricing, and Design: Monopoly

Keywords: Oil shocks, electricity demand, Structural econometric model, Time series analysis, US, SEMTSA model

DOI: 10.5547/ISSN0195-6574-EJ-Vol14-No2-6


Published in Volume 14, Number 2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.