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The impact of the shale gas revolution on the U.S. and Japanese natural gas markets

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  • Wakamatsu, Hiroki
  • Aruga, Kentaka

Abstract

We investigated whether the increase in the US shale gas production changed the structures of the US and Japanese natural gas markets using market data for the period 2002:5–2012:5. Our analysis consists of a structural break test and market integration analysis. The Bai and Perron structural break test detected a break point of natural gas prices and consumption in 2005 as well as other external shocks – Hurricane Katrina and the Lehman Shock – that are irrelevant to shale gas development. We eliminated the impact of these shocks by separating the data set using the breaks identified in our analysis. We found the breaks skewed the estimation; a market linkage existed between the US and Japanese markets in the original data set, while it did not in the separated data. The vector autoregressive (VAR) model also indicated a significant change before and after the break point; the US market had a one-side influence on the Japanese market before 2005, but the influence disappeared after 2005. Our results implied that the shale gas revolution, triggered by the increase in shale gas production in 2005, caused the change in the relationship between the US and Japanese natural gas markets.

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Bibliographic Info

Article provided by Elsevier in its journal Energy Policy.

Volume (Year): 62 (2013)
Issue (Month): C ()
Pages: 1002-1009

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Handle: RePEc:eee:enepol:v:62:y:2013:i:c:p:1002-1009

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

Related research

Keywords: Natural gas; Structural break test; Cointegration;

References

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  1. Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22.
  2. Maruyama, Shigenao & Deguchi, Koji & Chisaki, Masazumi & Okajima, Junnosuke & Komiya, Atsuki & Shirakashi, Ryo, 2012. "Proposal for a low CO2 emission power generation system utilizing oceanic methane hydrate," Energy, Elsevier, vol. 47(1), pages 340-347.
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  6. Ben Sita, Bernard & Marrouch, Walid & Abosedra, Salah, 2012. "Short-run price and income elasticity of gasoline demand: Evidence from Lebanon," Energy Policy, Elsevier, vol. 46(C), pages 109-115.
  7. Asche, Frank & Ogland, Atle & Osmundsen, Petter, 2011. "Gas versus oil prices. The impact of shale gas," UiS Working Papers in Economics and Finance 2011/6, University of Stavanger.
  8. Perron, P. & Bai, J., 1995. "Estimating and Testing Linear Models with Multiple Structural Changes," Cahiers de recherche 9552, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  9. Frank Asche & Odd Bjarte Nilsen & Ragnar Tveteras, 2008. "Natural Gas Demand in the European Household Sector," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 27-46.
  10. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
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Cited by:
  1. Vipin Arora & Yiyong Cai, 2014. "U.S. Natural Gas Exports and their Global Impacts," CAMA Working Papers 2014-22, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.

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