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Linking Natural Gas Markets: Is LNG Doing Its Job?

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  • Anne Neumann

Abstract

The increase in liquefied natural gas trade has accelerated the integration of previously segmented markets in North America, Europe, and Asia. This paper provides evidence on the integration of the transatlantic natural gas market. We test the theoretical proposition that in integrating markets commodity prices should move closer than before. Using 2,059 pairs of daily spot prices for natural gas in North America and Europe we investigate price dynamics covering the period from 1999 until 2008. We apply the Kalman Filter technique to gain detailed information on trends inherent over time. Results suggest an increasing convergence of spot prices on either side of the Atlantic Basin.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.89043.de/dp822.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 822.

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Length: 12 p.
Date of creation: 2008
Date of revision:
Handle: RePEc:diw:diwwpp:dp822

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Keywords: Market integration; spot markets; LNG; natural gas;

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References

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  1. 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 & Francis Journals, Taylor & Francis Journals, vol. 13(11), pages 727-732.
  2. Guillaume L¿Hégaret & Boriss Siliverstovs & Anne Neumann & Christian von Hirschhausen, 2003. "International Market Integration for Natural Gas?: A Cointegration Analysis of Prices in Europe, North America and Japan," Discussion Papers of DIW Berlin 393, DIW Berlin, German Institute for Economic Research.
  3. Apostolos Serletis, 1997. "Is There an East-West Split in North American Natural Gas Markets?," The Energy Journal, International Association for Energy Economics, International Association for Energy Economics, vol. 0(Number 1), pages 47-62.
  4. Hall, S G & Robertson, D & Wickens, M R, 1992. "Measuring Convergence of the EC Economies," The Manchester School of Economic & Social Studies, University of Manchester, University of Manchester, vol. 60(0), pages 99-111, Supplemen.
  5. Stephen P. A. Brown & Mine K. Yucel, 2008. "What Drives Natural Gas Prices?," The Energy Journal, International Association for Energy Economics, International Association for Energy Economics, vol. 0(Number 2), pages 45-60.
  6. John Cuddington & Zhongmin Wang, 2006. "Assessing the Degree of Spot Market Integration for U.S. Natural Gas: Evidence from Daily Price Data," Journal of Regulatory Economics, Springer, Springer, vol. 29(2), pages 195-210, 03.
  7. Frank Asche & Petter Osmundsen & Ragnar Tveterås, 2000. "European Market Integration for Gas? Volume Flexibility and Political Risk," CESifo Working Paper Series 358, CESifo Group Munich.
  8. Frank Asche, Petter Osmundsen, Ragnar Tveteras, 2001. "Market integration for natural gas in Europe," International Journal of Global Energy Issues, Inderscience Enterprises Ltd, Inderscience Enterprises Ltd, vol. 16(4), pages 300-312.
  9. Peter R. Hartley & Kenneth B Medlock III & Jennifer E. Rosthal, 2008. "The Relationship of Natural Gas to Oil Prices," The Energy Journal, International Association for Energy Economics, International Association for Energy Economics, vol. 0(Number 3), pages 47-66.
  10. Serletis, Apostolos & Rangel-Ruiz, Ricardo, 2004. "Testing for common features in North American energy markets," Energy Economics, Elsevier, Elsevier, vol. 26(3), pages 401-414, May.
  11. Panagiotidis, Theodore & Rutledge, Emilie, 2007. "Oil and gas markets in the UK: Evidence from a cointegrating approach," Energy Economics, Elsevier, Elsevier, vol. 29(2), pages 329-347, March.
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Citations

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Cited by:
  1. Cornille, David & Meyler, Aidan, 2010. "The behaviour of consumer gas prices in an environment of high and volatile oil prices," MPRA Paper 39099, University Library of Munich, Germany.
  2. International Monetary Fund, 2011. "Will Natural Gas Prices Decouple From Oil Prices Across the Pond?," IMF Working Papers 11/143, International Monetary Fund.
  3. Schultz, Emma & Swieringa, John, 2013. "Price discovery in European natural gas markets," Energy Policy, Elsevier, Elsevier, vol. 61(C), pages 628-634.
  4. Massol, Olivier & Tchung-Ming, Stéphane, 2010. "Cooperation among liquefied natural gas suppliers: Is rationalization the sole objective?," Energy Economics, Elsevier, Elsevier, vol. 32(4), pages 933-947, July.
  5. Asche, Frank & Misund, BÃ¥rd & Sikveland, Marius, 2013. "The relationship between spot and contract gas prices in Europe," Energy Economics, Elsevier, Elsevier, vol. 38(C), pages 212-217.
  6. Growitsch, Christian & Stronzik, Marcus & Nepal, Rabindra, 2012. "Price convergence and information efficiency in German natural gas markets," EWI Working Papers, Energiewirtschaftliches Institut an der Universitaet zu Koeln 2012-5, Energiewirtschaftliches Institut an der Universitaet zu Koeln.
  7. Robert Ritz, 2013. "Price Discrimination and Limits to Arbitrage in Global LNG Markets," Cambridge Working Papers in Economics 1340, Faculty of Economics, University of Cambridge.
  8. Lindback, Morten & Osmundsen, Petter & Øglend, Atle, 2013. "Shale Gas and the Relationship between U.S. Natural Gas, Liquified Petroleum Gases and Oil Market," UiS Working Papers in Economics and Finance 2013/5, University of Stavanger.
  9. Asche, Frank & Dahl, Roy Endre & Oglend, Atle, 2013. "Value-at-Risk: Risk assessment for the portfolio of oil and gas producers," UiS Working Papers in Economics and Finance 2013/3, University of Stavanger.
  10. Péter Erdős & Mihály Ormos, 2012. "Natural Gas Prices on Three Continents," Energies, MDPI, Open Access Journal, vol. 5(10), pages 4040-4056, October.
  11. Koenig, P., 2012. "The effect of LNG on the rleationship between UK and Continental European natural gas markets," Cambridge Working Papers in Economics 1253, Faculty of Economics, University of Cambridge.
  12. Egil Ferkingstad & Anders L{\o}land & Mathilde Wilhelmsen, 2011. "Causal modeling and inference for electricity markets," Papers 1110.5429, arXiv.org.

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