Impact of oil market disruptions on other fuel prices

Technical Report · Mon Feb 01 04:00:00 EST 1982

OSTI ID:5499279

Lareau, T J

During serious oil supply disruption episodes, other fuels rose in price along with oil, though not as steeply. Their increases contributed to depressed demand for other commodities, raised consumer and producer price indices, and undoubtedly intensified the pressures on macroeconomic and monetary policy. This report analyzes the pattern of fuel prices over the last ten years and concentrates on the factors that led to a price realignment subsequent to the previous oil disruptions. Based on this analysis and on past and prospective developments, the author concludes that natural gas and coal prices will be less affected by future oil price changes than in past episodes. He estimates that the nonoil fuels would contribute less than one-half a percentage point to either the PPI or CPI in the event of a moderate-sized disruption in which oil prices increased 75% in real terms. The author finds this relatively small expected price impact through his analysis of the markets for these fuels. The evidence suggests that the recent independence of the coal and oil markets will continue. In contrast, the short-run supply of natural gas is highly inelastic, and opportunities exist for almost immediate replacement of oil with gas as relative prices change. Thus, the price change of natural gas is principally determined by how much substitution would take place in a disruption. The effect of an oil disruption on the price of natural gas will depend on the timing and duration of any future disruption. This paper places boundaries around the likely nonoil price effects of a disruption under current and prospective conditions, and thus provides important information for policy planners. It clarifies the effect of prospective developments on those boundaries. Finally, it offers analysts a framework with which the effects of a disruption can be estimated under conditions existing when it occurs. 37 refs., 6 figs., 6 tabs.

• Research Organization: Resources for the Future, Inc., Washington, DC (USA)
• DOE Contract Number: AC01-80PE70267
• OSTI ID: 5499279
• Report Number(s): DOE/PE/70267-T21; ON: DE85016759
• Country of Publication: United States
• Language: English

Related Subjects

29 ENERGY PLANNING, POLICY, AND ECONOMY
290200 -- Energy Planning & Policy-- Economics & Sociology
294001 -- Energy Planning & Policy-- Coal
294002* -- Energy Planning & Policy-- Petroleum
294003 -- Energy Planning & Policy-- Natural Gas
CARBONACEOUS MATERIALS
COAL
ECONOMIC ANALYSIS
ECONOMIC IMPACT
ECONOMICS
ENERGY SOURCES
ENERGY SUPPLIES
FLUIDS
FOSSIL FUELS
FUEL GAS
FUEL SUBSTITUTION
FUELS
GAS FUELS
GASES
MARKET
MATERIALS
NATURAL GAS
PETROLEUM
PRICES
SUPPLY DISRUPTION