Natixis - What is the price elasticity of energy demand?

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Natixis

Patrick Artus

What is the price elasticity of energy demand?

One might ask: if Russia no longer exports oil and natural gas, what will be the equilibrium prices for oil and natural gas? For oil, this is the global oil price; for natural gas, it is the European gas price. To estimate these equilibrium prices, we have to know the elasticity of energy demand to its price worldwide (for oil) and in the European Union (for natural gas). We find that the short-term price elasticity of global oil demand is -0.05, so that stopping Russian exports would lead to a 104% rise in the global equilibrium oil price. We also find that the short-term price elasticity of demand for natural gas in the European Union is -0.12, so that stopping Russian exports would lead to a 324% rise in the equilibrium price of natural gas in Europe.

21/03/2022 1 EN

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Natixis

Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.

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Patrick Artus

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What is the price elasticity of energy demand?

Fine-tuning our Fed Call: No need to skip October

Labor market treads water in a choppy sea

Euro area April flash inflation: core inflation unexpectedly rose in April

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