Historical energy price shocks and their changing effects on the economy

van de Ven, Dirk Jan and Fouquet, Roger (2017) Historical energy price shocks and their changing effects on the economy. Energy Economics, 62. pp. 204-216. ISSN 0140-9883

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Abstract

The purpose of this paper is to identify the changes in the impact of energy shocks on economic activity – with an interest in assessing if an economy's vulnerability and resilience to shocks improved with economic development. Using data on the United Kingdom over the last three hundred years, the paper identifies supply, aggregate demand and residual shocks to energy prices and estimates their changing influence on energy prices and GDP. The results suggest that the impacts of supply shocks rose with its increasing dependence on coal, and declined with its partial transition to oil. However, the transition from exporting coal to importing oil increased the negative impacts of demand shocks. More generally, the results indicate that improvements in vulnerability and resilience to shocks did not progress systematically as the economy developed. Instead, the changes in impacts depended greatly on the circumstances related to the demand for and supply of energy sources. If these experiences are transferable to future markets, a transition to renewable energy sources is likely to reduce vulnerability and increase resilience to energy price shocks.

Item Type:	Article
Official URL:	https://www.journals.elsevier.com/energy-economics
Additional Information:	© 2017 The Authors © CC BY 4.0
Divisions:	Grantham Research Institute
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HD Industries. Land use. Labor
JEL classification:	N - Economic History > N5 - Agriculture, Natural Resources, Environment, and Extractive Industries > N53 - Europe: Pre-1913 N - Economic History > N7 - Transport, International and Domestic Trade, Energy, Technology, and Other Services > N73 - Europe: Pre-1913 O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development > O33 - Technological Change: Choices and Consequences; Diffusion Processes Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q4 - Energy > Q43 - Energy and the Macroeconomy
Date Deposited:	06 Jan 2017 15:22
Last Modified:	21 Nov 2024 23:18
Projects:	ES/K006576/1
Funders:	Economic and Social Research Council
URI:	http://eprints.lse.ac.uk/id/eprint/68778

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