Trend and Cycles in Coal and Oil Prices in the Long Run: A Schumpeterian Approach

14 Pages Posted: 15 Jan 2014

See all articles by Harry Bloch

Harry Bloch

Curtin University of Technology - Curtin Business School - School of Economics and Finance

David Sapsford

University of Liverpool Management School (ULMS) - Economics Division

Date Written: November 1, 2011

Abstract

We contribute to the task of identifying trends and cycles in energy prices by examining very long series of prices for coal and oil, going back to 1650 in the case of coal and 1859 in the case of oil. We find annual rates of increase in real price of greater than two percent are found for coal in one cycle, 1842 to 1897, and for oil in two cycles, 1897 to 1953 and 1953 to 2009. However, there is no noticeable change in coal prices for the earliest cycles, from 1675 to 1731 and 1731 to 1787, as well as a notable decline in the latest cycle, from 1953 to 2009. Also, oil prices decline from 1859 to 1897. Clearly, there is no unitary trend across coal and oil that would suggest a general failure of supply due to universal depletion of fossil fuels. Instead, the suggestion is that developments in technology are of critical importance. In particular, the shift in motive power from coal to oil is associated with a rise in the price of oil relative to coal and, in the most recent cycle, a trend decrease in the real coal price.

Keywords: Coal price, oil price, Schumpeter, business cycles, endogenous technical change

JEL Classification: D24, L72, Q33, Q41

Suggested Citation

Bloch, Harry and Sapsford, David, Trend and Cycles in Coal and Oil Prices in the Long Run: A Schumpeterian Approach (November 1, 2011). CRAE Research Paper No. 201104. Available at SSRN: https://ssrn.com/abstract=2378690 or http://dx.doi.org/10.2139/ssrn.2378690

Harry Bloch (Contact Author)

Curtin University of Technology - Curtin Business School - School of Economics and Finance ( email )

Curtin University
GPO Box U 1987
Perth, 6845
Australia
+61 8 9266 2035 (Phone)
+61 8 9266 3026 (Fax)

David Sapsford

University of Liverpool Management School (ULMS) - Economics Division ( email )

Eleanor Rathbone Building
Bedford Street North
Liverpool L69 7ZA
United Kingdom
+44 (0)151 795 3701 (Phone)
+44 (0)151 795 3001 (Fax)

HOME PAGE: http://www.liv.ac.uk/management/

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