Does oil price uncertainty affect energy use?

G.H. Kuper, D.P. van Soest

Research output: Contribution to journalArticleScientificpeer-review

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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.
Original languageEnglish
Pages (from-to)55-78
JournalEnergy Journal
Volume27
Issue number1
DOIs
Publication statusPublished - 2006

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