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Is there a bubble in the shale gas market?

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  • Yang, Haijun
  • Han, Xin
  • Wang, Li

Abstract

In this paper, we investigate the existence of bubbles in the shale gas sector. We construct a shale gas index to reflect the market’s expectations for the future growth of the shale gas and separate the shale gas spot price from the spot market to reflect current demand. The results from the Generalized Supremum Augmented Dickey-Fuller and Supremum Kapetanios, Shin and Snell test show strong evidence of multiple episodes of the explosive phenomenon in the shale gas sector. Moreover, we set up the date stamp at both the outset and the end of these explosive behaviors. We find the bubbles are inconsistent with the natural gas spot price and WTI crude oil price. For shale gas, our empirical results present that there is a similar trend among the futures market, stock market, and the spot market. Moreover, in the whole energy market, the explosive bubble behavior which we find in the shale gas sector before 2009 is consistent with the natural gas and crude oil prices, which verifies the shale gas price coherence with other main energy productions.

Suggested Citation

  • Yang, Haijun & Han, Xin & Wang, Li, 2021. "Is there a bubble in the shale gas market?," Energy, Elsevier, vol. 215(PA).
    • Handle: RePEc:eee:energy:v:215:y:2021:i:pa:s0360544220322088
    DOI: 10.1016/j.energy.2020.119101
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    4. Pastor, Daniel J. & Ewing, Bradley T., 2022. "Is there evidence of mild explosive behavior in Alaska North Slope crude oil prices?," Energy Economics, Elsevier, vol. 114(C).
    5. Su, Chi Wei & Qin, Meng & Chang, Hsu-Ling & Țăran, Alexandra-Mădălina, 2023. "Which risks drive European natural gas bubbles? Novel evidence from geopolitics and climate," Resources Policy, Elsevier, vol. 81(C).
    6. Khan, Khalid & Su, Chi-Wei & Rehman, Ashfaq U., 2021. "Do multiple bubbles exist in coal price?," Resources Policy, Elsevier, vol. 73(C).
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    More about this item

    Keywords

    GSAD test; Sup KSS test; Bubbles; Shale gas;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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