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Stationary Changes in Long-Run Energy Commodity Prices

Aufsätze referiert extern - Web of Science

Aleksandar Zaklan, Jan Abrell, Anne Neumann

In: Energy Economics 59 (2016), S. 96-103


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 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 1960s/early 1970s-

Aleksandar Zaklan

Research Associate in the Energy, Transportation, Environment Department

JEL-Classification: C12;C22;Q31;Q35;Q41
Keywords: Non-renewable commodity prices, Competitive storage, Resource scarcity, Stationarity, Structural breaks