Stationarity changes in long-run energy commodity prices
- Situated at the intersection of the literatures on speculative storage and non-renewable commodity scarcity, this paper considers whether changes in persistence have occurred in long-run U.S. prices of the energy commodities crude oil, natural gas and bituminous coal. We allow for a structural break when testing for a break in persistence to avoid a change in the stochastic properties of prices being confounded by an unaccounted-for deterministic shift in the price series. We find that coal prices are trend stationary throughout their evolution and that oil prices change from stationarity to non-stationarity in the decade between the late 1960s to late 1970s. The result on gas prices is ambiguous. Our results demonstrate the importance of accounting for a possible structural shift when testing for breaks in persistence, while being robust to the exact date of the structural break. Based on our analysis we caution against viewing long-run energy commodity prices as being non-stationary and conclude in favor of modeling commodity marketSituated at the intersection of the literatures on speculative storage and non-renewable commodity scarcity, this paper considers whether changes in persistence have occurred in long-run U.S. prices of the energy commodities crude oil, natural gas and bituminous coal. We allow for a structural break when testing for a break in persistence to avoid a change in the stochastic properties of prices being confounded by an unaccounted-for deterministic shift in the price series. We find that coal prices are trend stationary throughout their evolution and that oil prices change from stationarity to non-stationarity in the decade between the late 1960s to late 1970s. The result on gas prices is ambiguous. Our results demonstrate the importance of accounting for a possible structural shift when testing for breaks in persistence, while being robust to the exact date of the structural break. Based on our analysis we caution against viewing long-run energy commodity prices as being non-stationary and conclude in favor of modeling commodity market fundamentals as stationary, meaning that speculative storage will tend to have a dampening effect on prices. We also cannot reject that long-run prices of coal and, with some hesitation, gas follow a Hotelling-type rule. In contrast, we reject the Hotelling rule for oil prices since the late 1960s/early 1970s. (C) 2016 Elsevier B.V. All rights reserved.…
Author details: | Aleksandar Zaklan, Jan Abrell, Anne Neumann |
---|---|
DOI: | https://doi.org/10.1016/j.eneco.2016.07.022 |
ISSN: | 0140-9883 |
ISSN: | 1873-6181 |
Title of parent work (English): | Energy economics |
Publisher: | Elsevier |
Place of publishing: | Amsterdam |
Publication type: | Article |
Language: | English |
Year of first publication: | 2016 |
Publication year: | 2016 |
Release date: | 2020/03/22 |
Tag: | Competitive storage; Non-renewable commodity prices; Resource scarcity; Stationarity; Structural breaks |
Volume: | 59 |
Number of pages: | 8 |
First page: | 96 |
Last Page: | 103 |
Organizational units: | Wirtschafts- und Sozialwissenschaftliche Fakultät / Wirtschaftswissenschaften |
Peer review: | Referiert |