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Estimates of the Price Elasticities of Natural Gas Supply and Demand in the United States

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  • Arora, Vipin

Abstract

I estimate short and long-run price elasticities of U.S. natural gas supply and demand. For robustness, the estimates are based on data of varying frequencies and samples, some of which include the recent U.S. shale gas boom. Aside from the numbers themselves, there are two main conclusions. As expected, U.S. price elasticities of natural gas supply are higher in both the short and long-run when the e�ffects of shale are included in the sample (post-2007). The calculated price elasticities of natural gas demand are also more responsive than recent estimates, but in-line with earlier ones.

Suggested Citation

  • Arora, Vipin, 2014. "Estimates of the Price Elasticities of Natural Gas Supply and Demand in the United States," MPRA Paper 54232, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:54232
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    Cited by:

    1. Charles F. Mason & Lucija A. Muehlenbachs & Sheila M. Olmstead, 2015. "The Economics of Shale Gas Development," Annual Review of Resource Economics, Annual Reviews, vol. 7(1), pages 269-289, October.
    2. R. Andrew Butters & Daniel F. Spulber, 2020. "The Extent Of The Market And Integration Through Factor Markets: Evidence From Wholesale Electricity," Economic Inquiry, Western Economic Association International, vol. 58(3), pages 1076-1108, July.
    3. Arora, Vipin & Cai, Yiyong, 2014. "U.S. natural gas exports and their global impacts," Applied Energy, Elsevier, vol. 120(C), pages 95-103.
    4. Feng, Gen-Fu & Wang, Quan-Jing & Chu, Yin & Wen, Jun & Chang, Chun-Ping, 2021. "Does the shale gas boom change the natural gas price-production relationship? Evidence from the U.S. market," Energy Economics, Elsevier, vol. 93(C).
    5. Wiggins, Seth & Etienne, Xiaoli, 2015. "US Natural Gas Price Determination: Fundamentals and the Development of Shale," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205788, Agricultural and Applied Economics Association.
    6. Melo, Carolina & Moita, Rodrigo & Sunao, Stefanie, 2021. "Passing through the supply chain: Implications for market power," International Journal of Industrial Organization, Elsevier, vol. 79(C).
    7. Jeffrey C. Peters & Thomas W. Hertel, 2017. "Achieving the Clean Power Plan 2030 CO2 Target with the New Normal in Natural Gas Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Number 5).
    8. Scheitrum, Daniel P. & Parker, Nathan C., 2016. "Renewable Natural Gas as a Solution to Climate Goals: Supply Estimates and Response to California’s Low Carbon Fuel Standard," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235883, Agricultural and Applied Economics Association.
    9. Charles F. Mason and Gavin Roberts, 2018. "Price Elasticity of Supply and Productivity: An Analysis of Natural Gas Wells in Wyoming," The Energy Journal, International Association for Energy Economics, vol. 0(Special I).
    10. Scheitrum, Daniel, 2017. "Renewable Natural Gas as a Solution to Climate Goals: Response to California's Low Carbon Fuel Standard," MPRA Paper 77193, University Library of Munich, Germany.
    11. Woollacott, Jared, 2020. "A bridge too far? The role of natural gas electricity generation in US climate policy," Energy Policy, Elsevier, vol. 147(C).
    12. Ikonnikova, Svetlana A. & del Carpio Neyra, Victor & Berdysheva, Sofia, 2022. "Investment choices and production dynamics: The role of price expectations, financial deficit, and production constraints," Journal of Economics and Business, Elsevier, vol. 120(C).
    13. Catherine Hausman & Ryan Kellogg, 2015. "Welfare and Distributional Implications of Shale Gas," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 46(1 (Spring), pages 71-139.
    14. Wiggins, Seth & Etienne, Xiaoli L., 2017. "Turbulent times: Uncovering the origins of US natural gas price fluctuations since deregulation," Energy Economics, Elsevier, vol. 64(C), pages 196-205.
    15. Prest, Brian C. & Stock, James H., 2023. "Climate royalty surcharges," Journal of Environmental Economics and Management, Elsevier, vol. 120(C).
    16. Cole, Wesley J. & Medlock, Kenneth B. & Jani, Aditya, 2016. "A view to the future of natural gas and electricity: An integrated modeling approach," Energy Economics, Elsevier, vol. 60(C), pages 486-496.
    17. Sexton, Steven & Eyer, Jonathan, 2016. "Leveling the playing field of transportation fuels: Accounting for indirect emissions of natural gas," Energy Policy, Elsevier, vol. 95(C), pages 21-31.
    18. Burns, Kelly, 2021. "An investigation into changes in the elasticity of U.S. residential natural gas consumption: A time-varying approach," Energy Economics, Elsevier, vol. 99(C).
    19. Arora, Vipin, 2018. "Natural Gas and the US Economy: Some Preliminary Rules of Thumb," MPRA Paper 87279, University Library of Munich, Germany.
    20. Prest, Brian C., 2020. "Supply-Side Reforms to Oil and Gas Production on Federal Lands: Modeling the Implications for Climate Emissions, Revenues, and Production Shifts," RFF Working Paper Series 20-16, Resources for the Future.
    21. Malzi, Mohamed Jaouad & Sohag, Kazi & Vasbieva, Dinara G. & Ettahir, Aziz, 2020. "Environmental policy effectiveness on residential natural gas use in OECD countries," Resources Policy, Elsevier, vol. 66(C).
    22. Riepin, I. & Müsgens, F., 2019. "Seasonal Flexibility in the European Natural Gas Market," Cambridge Working Papers in Economics 1976, Faculty of Economics, University of Cambridge.

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    More about this item

    Keywords

    Natural gas; sign restriction; shale; elasticity; long-run; short-run;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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