Date of this Version
Energy price trends have shown increases in both the mean and variance in recent years. In addition, innovation activity continues to develop new technologies that can benefit consumers by providing the same services as traditional technology, but with higher input use efficiency. For example, technologies such as hybrid vehicles or compact fluorescent light bulbs provide consumers with benefits, while simultaneously reducing the demand for limited energy inputs. Examining the impact of increasing price variability on the adoption of conservation technologies is important to innovators and policy-makers. This is especially important when multiple technologies exist, and producers have an option to buy conservation technology that can reduce use of limited natural resources.
The trend in real diesel prices between 1980 and 2009 are shown in Figure 1 (on next page). Two things stand out from this chart: the real price of diesel has increased in the last decade, and; the variation in this price is much larger in the last five years than in the earlier period.