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The UK Market for Natural Gas, Oil and Electricity: Are the Prices Decoupled?

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  • Frank Asche
  • Petter Osmundsen
  • Maria Sandsmark

Abstract

After opening up of the Interconnector, the liberalized UK natural gas market and the regulated Continental gas markets became physically integrated and the Continental gas price became dominant. However, in an interim period Ð after deregulation of the UK gas market (1995) and the opening up of the Interconnector (1998) Ð the UK gas market had neither government price regulation nor a physical Continental gas linkage. We use this period Ð which for natural gas markets displays an unusual combination of deregulation and autarky Ð as a natural experiment to explore if decoupling of natural gas prices from prices of other energy commodities, such as oil and electricity, took place. Monthly price data in the period 1995-1998 indicates a highly integrated market where wholesale demand seems to be for energy rather than a specific energy source.

Suggested Citation

  • Frank Asche & Petter Osmundsen & Maria Sandsmark, 2006. "The UK Market for Natural Gas, Oil and Electricity: Are the Prices Decoupled?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 27-40.
  • Handle: RePEc:aen:journl:2006v27-02-a02
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    References listed on IDEAS

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    1. Franck Lecocq & Karan Capoor, "undated". "State and Trends of the Carbon Market 2005," World Bank Other Operational Studies 13411, The World Bank.
    2. Gernot Klepper & Sonja Peterson, 2005. "Trading Hot-Air. The Influence of Permit Allocation Rules, Market Power and the US Withdrawal from the Kyoto Protocol," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 32(2), pages 205-228, October.
    3. repec:wbk:wboper:13410 is not listed on IDEAS
    4. Franck Lecocq, 2005. "State and Trends of the Carbon Market—2004," World Bank Publications, The World Bank, number 7457.
    5. Klepper, Gernot & Peterson, Sonja, 2004. "The EU emissions trading scheme allowance prices, trade flows and competitiveness effects," Open Access Publications from Kiel Institute for the World Economy 3270, Kiel Institute for the World Economy (IfW).
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    JEL classification:

    • F0 - International Economics - - General

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