As a rule, the importance of non-price factors is an inverse function of the time horizon considered. Over the short-term, the impacts of economic structural change and technology diffusion are necessarily low. A whole host of levies such as royalties and taxes raised at the points of energy production or use. Consumers willingness to pay for quality and convenience of energy services. Furthermore, given the importance of energy and the vast volumes traded, prices are influenced by a whole range of additional factors, from inevitable elements of speculation to geopolitical considerations, all of which can decouple energy price trends from any underlying physical balance between supply and demand.
Taxes are especially significant.
Currently, no methodologies exist to project future energy prices taking all of above mentioned factors into account, nor were the SRES scenarios intended to make explicit assumptions on such factors such as future energy taxation. Each has different representations of price formation mechanisms and their relationship to macro-economic or sectoral energy demand. These are summarized in Appendix IV . Over recent years this simplified modeling dichotomy has progressively weakened because of further advances in methodology and the development of hybrid modeling approaches. Among various parameters, the extraction costs of fossil fuel resources and the coefficients of utilization costs and their evolution over time are the most important determinants.