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Europe in World Natural Gas Market: International Transmission of European Price Shocks

Author

Listed:
  • Ivan Aleksandrovich Kopytin

    (Head of Center for Energy Research, Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences, Profsoyuznaya Str.23, Moscow, 117997, Russian Federation.)

  • Alexander Oskarovich Maslennikov

    (Senior Research Fellow, Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences, Profsoyuznaya Str.23, Moscow, 117997, Russian Federation.)

  • Stanislav Vyacheslavovich Zhukov

    (Deputy Director for Science, Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences, Profsoyuznaya Str.23, Moscow, 117997, Russian Federation)

Abstract

The paper applies the Vector Error Correction Model (VECM) framework with 250 days rolling window to the analysis of the interconnectedness of regional markets for natural gas in Europe, the Asia-Pacific region and the US. Transmission of European gas market fundamentals to other regional gas markets is assessed by using carbon price in the EU Emissions Trading System and European gas storage capacity utilization. The latter is proven to be a significant component in the cointegrating equation that links natural gas prices in Europe and the Asia-Pacific region. It is shown that gas prices in all three regional markets are pairwise cointegrated while cointegration between gas and oil prices is absent in Europe and the Asia-Pacific region and weak in the US. It is also concluded that fundamental factors of the European gas market influence gas price dynamics not only in Europe, but also in the Asia-Pacific region and, to a lesser extent, the US. In sum, the increasing importance of LNG import in European natural gas consumption has given a strong impetus to the formation of the global natural gas market.

Suggested Citation

  • Ivan Aleksandrovich Kopytin & Alexander Oskarovich Maslennikov & Stanislav Vyacheslavovich Zhukov, 2022. "Europe in World Natural Gas Market: International Transmission of European Price Shocks," International Journal of Energy Economics and Policy, Econjournals, vol. 12(3), pages 8-15, May.
    • Handle: RePEc:eco:journ2:2022-03-2
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    1. S. V. Zhukov & O. B. Reznikova, 2023. "Energy Transition in the United States, Europe and China: Latest Trends," Studies on Russian Economic Development, Springer, vol. 34(4), pages 439-449, August.

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    More about this item

    Keywords

    Gas Price; Oil Price; Carbon Price; Transmission of Price Shocks; LNG; Gas Storage Capacity Utilization; EU; Asia-Pacific Region; US;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • Q35 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Hydrocarbon Resources
    • Q37 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Issues in International Trade
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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