Energy markets – Who are the influencers?

• Published in: Energy (Oxford) 2022-01, Vol.239, p.121962, Article 121962
• Main Authors: Ferreira, Paulo, Almeida, Dora, Dionísio, Andreia, Bouri, Elie, Quintino, Derick
• Format: Article
• Language: English
• Subjects: Clean and dirty energy assets; Clean energy; Clean technology; Commodities; Deregulation; Energy; Energy industry; Energy markets; Entropy; Granger causality; Influencer; Natural gas; Pandemics; Renewable energy; Risk allocation; Risk management; Transfer entropy
• ISSN: 0360-5442; 1873-6785
• DOI: 10.1016/j.energy.2021.121962

The energy markets have recently undergone important transformations (e.g. deregulation, technological progress, renewable energy deployment and changing energy consumer behaviour) and witnessed a variety of crisis periods, affecting the relationships among energy commodities and their interactions with clean energy indices. This has implications for price discovery, asset allocation and risk management, which requires in-depth analysis to uncover and identify which energy indices (or forms of energy) lead others or are the most influential, while accounting for asymmetry and non-linearity characteristics. To uncover the complex structure of the relationship across the returns of seven different energy commodities and two clean energy stock indices, we apply Granger causality and transfer entropy in both static and dynamic approaches. The results from the Granger causality analysis identify the influence of the other energy products on natural gas, whereas the transfer entropy analysis reveals the importance of WTI oil and the influence of clean energy indices. Diesel is the most influenced energy commodity. A rolling windows analysis confirms those findings and shows evidence of a time-variation that reflects the impacts of crisis periods, especially the pandemic, on the dynamics of relationships. •Seven energy commodities prices and two clean energy stock indices are analysed.•Both Granger causality and transfer entropy are employed.•Results show evidence of a time-variation that reflects the impacts of crises periods.