Persistence in International Energy Prices 1960-2023

This paper examines the persistence of energy prices in international markets and its implications for market participants and policymakers. Using the ARFIMA model and log-periodogram regression technique, we estimate the long memory parameter in energy price indices. Our findings confirm the persistence in energy prices, indicating that past price movements have a lasting impact on future prices. For market participants, understanding the persistence of energy prices is crucial for developing effective trading strategies and risk management measures. The long-lasting effects of past price movements suggest the need for preparedness in the face of extended periods of price volatility. Policymakers can also benefit from this knowledge by implementing measures to stabilize energy markets and mitigate the impacts of price shocks. Furthermore, our study highlights the importance of incorporating the persistence of shocks in energy price forecasting models. By accounting for the long-lasting effects of past price movements, these models can improve the accuracy of price forecasts and aid in decision-making for market participants. While our study provides valuable insights into the persistence of energy prices, further research is needed to investigate the root causes of persistence and its implications in a rapidly changing global economic environment. Additionally, exploring the individual factors that influence energy price indices can enhance our understanding of their dynamics and improve prediction accuracy. Overall, our findings contribute to the existing literature by confirming the presence of persistence in energy prices and providing valuable insights for market participants and policymakers. Further research in this area can offer more pragmatic advice and enhance decision-making in the energy markets.