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Testing for Market Integration: Crude Oil, Coal, and Natural Gas


  • Lance J. Bachmeier
  • James M. Griffin


Prompted by the contemporaneous spike in coal, oil, and natural gas prices, this paper evaluates the degree of market integration both within and between crude oil, coal, and natural gas markets. Our approach yields parameters that can be readily tested against a priori conjectures. Using daily price data for five very different crude oils, we conclude that the world oil market is a single, highly integrated economic market. On the other hand, coal prices at five trading locations across the United States are cointegrated, but the degree of market integration is much weaker, particularly between Western and Eastern coals. Finally, we show that crude oil, coal, and natural gas markets are only very weakly integrated. Our results indicate that there is not a primary energy market. Despite current price peaks, it is not useful to think of a primary energy market, except in a very long run context.

Suggested Citation

  • Lance J. Bachmeier & James M. Griffin, 2006. "Testing for Market Integration: Crude Oil, Coal, and Natural Gas," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 55-72.
  • Handle: RePEc:aen:journl:2006v27-02-a04

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    References listed on IDEAS

    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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