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 journalJournal articlepeer-review

    35 Citations (Scopus)

    Abstract

    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
    Volume34
    Issue number15
    DOIs
    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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