Decades of Disruptions: Energy Price Shocks and Economic Evolution

Abstract

The aim of this article is to examine differences in the effect of energy disruptions on economic growth; with an involvement in evaluating whether the vulnerability and resilience of an economy to shocks is improving with economy growth. The paper explains productivity, leftover shocks and aggregate demand at energy prices utilizing data in the United Kingdom over past three hundred years and calculates their shifting impact on GDP and energy prices. The findings indicate that, with the increasing reliance on coal, the influences of supply shocks improved and decreased with their gradual conversion to oil. But the shift towards coal exports to oil imports has raised the negative effect of shocks in demand. More broadly, the findings suggest that as the economy evolved, changes in vulnerability and tolerance to shocks were not progressing thoroughly. The adjustments in impacts, however, relied heavily on the circumstances associated with demand and energy source supply. Since such observations are translatable to stock market, a change to either a diversification of renewable energy sources will probably reduce weakness and build resilience to crises in energy costs.

Keywords- Disruptions, Energy,  Price Shocks and Economic Evolution