Facebook LinkedIn Twitter
Shop

IAEE Members and subscribers to The Energy Journal: Please log in to access the full text article or receive discounted pricing for this article.

Does Oil Price Uncertainty Affect Energy Use?

Abstract:
Theory predicts that the presence of fixed costs implies that the relationship between energy use and energy price changes is asymmetric, as the firm�s output and investment decisions respond differently to energy price increases and decreases. The asymmetry is exacerbated if future energy prices are uncertain, but to date the empirical literature does not explicitly take uncertainty into account. The contribution of this paper is twofold. First, we develop a new measure of energy price uncertainty. Second, we apply this measure to explain energy use in fifteen OECD countries between 1978 and 1996. Our results support the theoretical prediction that energy price uncertainty affects the asymmetry and renders energy saving technologies less attractive.

Purchase ( $25 )

Energy Specializations: Petroleum – Markets and Prices for Crude Oil and Products; Petroleum – Policy and Regulation; Energy Modeling – Energy Data, Modeling, and Policy Analysis

JEL Codes:
L13 - Oligopoly and Other Imperfect Markets
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General
E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination

Keywords: Oil prices, volatility, uncertainty, GARCH, OECD

DOI: 10.5547/ISSN0195-6574-EJ-Vol27-No1-4


Published in Volume 27, Number 1 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.