Bi-directional causality in California's electricity and natural-gas markets

Chi-Keung WOO*, Arne Olson, Ira Horowitz, Stephen Luk

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

25 Citations (Scopus)


The Granger instantaneous-causality test is applied to explore the potential causal relationships between wholesale electricity and natural-gas prices in California. The test shows these relationships to be bi-directional, and reveals California's electricity and natural-gas markets to be as inextricably intertwined as casual observation and theoretical considerations would suggest they ought to be. This meshing of markets exacerbated the effects of California's natural-gas crisis on the contemporaneous electricity crisis, while concurrently the electricity crisis may have contributed to the dysfunction in the national-gas market and helped to precipitate the natural-gas crisis. The finding supports an integrated approach, as opposed to a piecemeal approach, for formulating energy policy recommendations, not just in California but in the world at large.

Original languageEnglish
Pages (from-to)2060-2070
Number of pages11
JournalEnergy Policy
Issue number15
Publication statusPublished - Oct 2006

Scopus Subject Areas

  • Energy(all)
  • Management, Monitoring, Policy and Law

User-Defined Keywords

  • Causality
  • Electricity crisis
  • Natural-gas crisis


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