Do energy prices converge across Russian regions?

This paper tests for price convergence in Russian energy markets from January 2003 to October 2010. Monthly energy prices for four energy products (diesel, gasoline, electricity and coal) for 83 Russian regions are drawn from Russia's statistical agency Rosstat. The study contributes to the existing literature by using the Exponential Smooth Auto-Regressive Augmented Dickey-Fuller unit root test in a panel setup, which encompasses cross-section dependence. We find that there are no fully integrated national energy markets in Russia, possibly due to the peripheral position of diverging regions, unbalanced distribution of energy reserves and limited cross-border transmission capacity.

Research Highlights► Energy price convergence across Russian regions from 2003 to 2010 is analyzed. ► Results show ongoing price divergence in Russian energy markets. ► Divergence could be due to unbalanced distribution of energy reserves. ► Reform of the railway is need for energy price convergence across Russian regions.