“Economics of the constants” and long cycles of energy prices dynamics

Abstract

This paper shows the cyclical evolution of energy prices and energy costs share with cycles lasting 25-30 years. Energy costs constants, i.e. stable over long time energy costs to income ratio, are the center of ‘economic gravitation’. Cycles and energy affordability thresholds are found in all major final energy use sectors manifesting the ‘minus one’ phenomenon, which shows that cyclelong energy intensity changes as much as real energy prices. Energy affordability thresholds and asymmetric price elasticities are important factors determining the existence of the turning points towards the center of ‘economic gravitation’ in the cyclic evolution of energy costs shares. The cyclical nature of energy price dynamics has been manifesting for five centuries and experienced multiple technological transitions and changes in the energy mix.