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Estimating the long-run equilibrium relationship: The case of city-gate and residential natural gas prices

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  • Arano, Kathleen
  • Velikova, Marieta

Abstract

This paper examines market cointegration of city-gate and residential natural gas prices. Cointegration of gas prices across different segments of the industry provides evidence that deregulation has resulted into a more integrated, competitive natural gas industry where gas prices converge into a long-run equilibrium. Our results indicate prices further down the distribution line, the final two points of consumption, are cointegrated for a majority of the US states post open access and retail unbundling, although we find little evidence of perfect market integration. The two price series likewise converge to the long-run equilibrium faster post open access and retail unbundling. Results relative to state level unbundling (choice programs) reveal mixed outcomes with a few states without retail unbundling exhibiting market integration while some states with full unbundling exhibiting non-cointegration.

Suggested Citation

  • Arano, Kathleen & Velikova, Marieta, 2010. "Estimating the long-run equilibrium relationship: The case of city-gate and residential natural gas prices," Energy Economics, Elsevier, vol. 32(4), pages 901-907, July.
  • Handle: RePEc:eee:eneeco:v:32:y:2010:i:4:p:901-907
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    References listed on IDEAS

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    Cited by:

    1. Apergis, Nicholas & Bowden, Nicholas & Payne, James E., 2015. "Downstream integration of natural gas prices across U.S. states: Evidence from deregulation regime shifts," Energy Economics, Elsevier, vol. 49(C), pages 82-92.
    2. Potts, Todd B. & Yerger, David B., 2016. "Marcellus Shale and structural breaks in oil and gas markets: The case of Pennsylvania," Energy Economics, Elsevier, vol. 57(C), pages 50-58.
    3. Sanders, Kelly T. & Webber, Michael E., 2015. "Evaluating the energy and CO2 emissions impacts of shifts in residential water heating in the United States," Energy, Elsevier, vol. 81(C), pages 317-327.

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