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Natural gas prices, LNG transport costs, and the dynamics of LNG imports

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  • Maxwell, Don
  • Zhu, Zhen
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Abstract

According to the U.S. Energy Information Administration, LNG is projected to become a much larger share of U.S. natural gas consumption, rising from current levels of around 2.5% of total natural gas consumption to 12.4% by 2030. Because natural gas and LNG are substitutes, natural gas prices are expected to be an important determinant of LNG imports. Furthermore, an increasing share of LNG is traded under short-term contracts with spot shipments being diverted to markets offering the highest returns (netbacks). Relative natural gas prices as well as LNG transportation costs are important determinants of LNG netbacks. This paper examines the empirical relationship between U.S. LNG imports, the Henry Hub price of natural gas relative to U.K. and Asia gas prices, and a proxy for LNG transportation costs using monthly data from 1997 to 2007. Granger causality tests, error variance decomposition, and impulse response analyses using a VAR model are employed to establish Granger-causality as well as the dynamics of natural gas prices and LNG transportation innovations on LNG imports.

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Bibliographic Info

Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 33 (2011)
Issue (Month): 2 (March)
Pages: 217-226

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Handle: RePEc:eee:eneeco:v:33:y:2011:i:2:p:217-226

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Web page: http://www.elsevier.com/locate/eneco

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Keywords: LNG Demand analysis Natural gas price;

References

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  1. James T. Jensen, 2003. "The LNG Revolution," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 1-45.
  2. Dagobert L. Brito & Peter R. Hartley, 2007. "Expectations and the Evolving World Gas Market," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 1-24.
  3. Karabetsou C. & Tzannatos E.S., 2003. "LNG Changes In The Context Of The Expanding Market Of Natural Gas," European Research Studies Journal, European Research Studies Journal, vol. 0(3-4), pages 67-84, July - De.
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Cited by:
  1. He, Yongxiu & Wang, Bing & Wang, Jianhui & Xiong, Wei & Xia, Tian, 2013. "Correlation between Chinese and international energy prices based on a HP filter and time difference analysis," Energy Policy, Elsevier, vol. 62(C), pages 898-909.
  2. Matt Zahynacz, 2013. "Prospects for Exporting Liquefied Natural Gas from British Columbia: An Application of Monte Carlo Cost-Benefit Analysis," Working Papers 2013-03, University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group.
  3. Nick, Sebastian & Thoenes, Stefan, 2013. "What Drives Natural Gas Prices? - A Structural VAR Approach," EWI Working Papers 2013-2, Energiewirtschaftliches Institut an der Universitaet zu Koeln.

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