Interactions and Shocks in Energy Markets – Empirical Evidence from VAR Modeling

In the context of the effects of global crises, such as the Covid-19 pandemic, the war in Ukraine, the energy crisis, prices on the Romanian energy market have experienced a series of major fluctuations. Thus, the paper aims to investigate how prices on the Romanian energy market (the price of electricity, natural gas and coal) mutually intercondition under the influence of macroeconomic factors, such as inflation and the exchange rate. Since the data are monthly, the VAR method will be used, which is a useful method for investigating how the selected variables respond to external shocks. The analysis period is January 2013 - December 2024, data collected monthly. The results obtained suggest that prices on the Romanian energy market are deeply interconnected. Electricity prices are sensitive to their own past developments and to coal prices. In contrast, natural gas prices are strongly affected by electricity prices, while coal and oil prices are sensitive to their own market changes. As for macroeconomic variables, inflation and exchange rate, the results show that they have a smaller impact on electricity prices in Romania. Our results provide empirical support both for energy decision-making and for companies to adjust their risk management and investment planning strategies.