Impact of fossil fuel prices on electricity prices in Mexico
Abstract
Purpose
The purpose of this paper is to examine the impact of fossil fuel prices – crude oil, natural gas and coal – on different electricity prices in Mexico. The use of alternative variables for electricity price helps to increase the robustness of the analysis in comparison to previous empirical studies.
Design/methodology/approach
The authors use an unrestricted vector autoregressive model and the sample covers the period January 2006 to January 2016.
Findings
Empirical findings suggest that crude oil, natural gas and coal prices have a significant positive impact on electricity prices – domestic electricity rates – in Mexico in the short run. Furthermore, crude oil and natural gas prices have also a significant positive impact on electricity prices – commercial and industrial electricity rates.
Originality/value
Two are the main contributions. First, this paper explores the nexus among crude oil, natural gas, coal and electricity prices in Mexico, while previous studies focus on the US, UK and some European economies. Second, instead of using one electricity price as a reference of national or domestic electricity sector, the analysis considers alternative Mexican electricity prices.
Keywords
Acknowledgements
The authors of this paper have not made their research data set openly available. Any enquiries regarding the data set can be directed to the corresponding author. The authors would like to thank the editor (Professor Mohsen Bahmani-Oskooee) and one anonymous referee for their helpful comments, suggestions and guidance.
Citation
Bernal, B., Molero, J.C. and Perez De Gracia, F. (2019), "Impact of fossil fuel prices on electricity prices in Mexico", Journal of Economic Studies, Vol. 46 No. 2, pp. 356-371. https://doi.org/10.1108/JES-07-2017-0198
Publisher
:Emerald Publishing Limited
Copyright © 2019, Emerald Publishing Limited