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Theory of Storage: An Empirical Assessment of the European Natural Gas Market

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Author Info
Marcus Stronzik
Margarethe Rammerstorfer
Anne Neumann

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Abstract

We analyze the relation between European natural gas storage facilities and price patterns at major trading points, considering the theory of storage to derive a testable hypothesis imposed by the non-arbitrage condition. To model the efficiency of the natural gas market, we apply two indirect tests absent the scarcity of European inventory data. We find that operators of storage facilities realize seasonal arbitrage profits, and that market performance overall is substantially distinct from the competitive benchmark.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.89005.de/dp821.pdf
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Publisher Info
Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 821.

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Length: 15 p.
Date of creation: 2008
Date of revision:
Handle: RePEc:diw:diwwpp:dp821

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Related research
Keywords: Storage; energy commodity; natural gas; convenience yield;

Find related papers by JEL classification:
Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Fama, Eugene F & French, Kenneth R, 1988. " Business Cycles and the Behavior of Metals Prices," Journal of Finance, American Finance Association, vol. 43(5), pages 1075-93, December. [Downloadable!] (restricted)
  2. Ng, Victor K & Pirrong, Stephen Craig, 1994. "Fundamentals and Volatility: Storage, Spreads, and the Dynamics of Metals Prices," Journal of Business, University of Chicago Press, vol. 67(2), pages 203-30, April. [Downloadable!] (restricted)
  3. Fama, Eugene F & French, Kenneth R, 1987. "Commodity Futures Prices: Some Evidence on Forecast Power, Premiums,and the Theory of Storage," Journal of Business, University of Chicago Press, vol. 60(1), pages 55-73, January. [Downloadable!] (restricted)
  4. Modjtahedi, Bagher & Movassagh, Nahid, 2005. "Natural-gas futures: Bias, predictive performance, and the theory of storage," Energy Economics, Elsevier, vol. 27(4), pages 617-637, July. [Downloadable!] (restricted)
  5. Anne Neumann & Boriss Siliverstovs & Christian von Hirschhausen, 2006. "Convergence of European spot market prices for natural gas? A real-time analysis of market integration using the Kalman Filter," Applied Economics Letters, Taylor and Francis Journals, vol. 13(11), pages 727-732, September. [Downloadable!] (restricted)
  6. Chiou Wei, Song Zan & Zhu, Zhen, 2006. "Commodity convenience yield and risk premium determination: The case of the U.S. natural gas market," Energy Economics, Elsevier, vol. 28(4), pages 523-534, July. [Downloadable!] (restricted)
  7. French, Kenneth R, 1986. "Detecting Spot Price Forecasts in Futures Prices," Journal of Business, University of Chicago Press, vol. 59(2), pages S39-54, April. [Downloadable!] (restricted)
  8. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254. [Downloadable!] (restricted)
  9. Hirschhausen, Christian von, 2008. "Infrastructure, regulation, investment and security of supply: A case study of the restructured US natural gas market," Utilities Policy, Elsevier, vol. 16(1), pages 1-10, March. [Downloadable!] (restricted)
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