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The relationship between spot and contract gas prices in Europe

  • Asche, Frank
  • Misund, Bård
  • Sikveland, Marius

Following deregulations in the European gas market, spot trading of natural gas has been established in the UK, Belgium and the Netherlands, while long-term contracts remain the dominant pricing process in continental Europe. In this paper we investigate the degree of market integration between the three spot markets, the contract gas price in Germany and the oil price. The results indicate a highly integrated market, and there is no evidence of an independent price determination process for natural gas.

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File URL: http://www.sciencedirect.com/science/article/pii/S0140988313000340
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Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 38 (2013)
Issue (Month): C ()
Pages: 212-217

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Handle: RePEc:eee:eneeco:v:38:y:2013:i:c:p:212-217
DOI: 10.1016/j.eneco.2013.02.010
Contact details of provider: Web page: http://www.elsevier.com/locate/eneco

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  1. Asche, Frank & Gjolberg, Ole & Volker, Teresa, 2003. "Price relationships in the petroleum market: an analysis of crude oil and refined product prices," Energy Economics, Elsevier, vol. 25(3), pages 289-301, May.
  2. Guillaume L'Hegaret & Boriss Siliverstovs & Christian von Hirschhausen, 2004. "International Market Integration for Natural Gas? A Cointegration Analysis of Prices in Europe, North America and Japan," Working Papers 0402, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
  3. Doane, Michael J & Spulber, Daniel F, 1994. "Open Access and the Evolution of the U.S. Spot Market for Natural Gas," Journal of Law and Economics, University of Chicago Press, vol. 37(2), pages 477-517, October.
  4. 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.
  5. Pettersson, Fredrik & Söderholm, Patrik & Lundmark, Robert, 2012. "Fuel switching and climate and energy policies in the European power generation sector: A generalized Leontief model," Energy Economics, Elsevier, vol. 34(4), pages 1064-1073.
  6. De Vany, Arthur S. & Walls, W. David, 1999. "Cointegration analysis of spot electricity prices: insights on transmission efficiency in the western US," Energy Economics, Elsevier, vol. 21(5), pages 435-448, October.
  7. Chaton, Corinne & Gasmi, Farid & Guillerminet, Marie-Laure & Oviedo, Juan-Daniel, 2012. "Gas release and transport capacity investment as instruments to foster competition in gas markets," Energy Economics, Elsevier, vol. 34(5), pages 1251-1258.
  8. Furió, Dolores & Chuliá, Helena, 2012. "Price and volatility dynamics between electricity and fuel costs: Some evidence for Spain," Energy Economics, Elsevier, vol. 34(6), pages 2058-2065.
  9. Panagiotidis, Theodore & Rutledge, Emilie, 2007. "Oil and gas markets in the UK: Evidence from a cointegrating approach," Energy Economics, Elsevier, vol. 29(2), pages 329-347, March.
  10. 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.
  11. Slade, Margaret E, 1986. "Exogeneity Tests of Market Boundaries Applied to Petroleum Products," Journal of Industrial Economics, Wiley Blackwell, vol. 34(3), pages 291-303, March.
  12. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  13. Frank Asche & Ole Gjølberg & Atle G. Guttormsen, 2012. "Testing the central market hypothesis: a multivariate analysis of Tanzanian sorghum markets," Agricultural Economics, International Association of Agricultural Economists, vol. 43(1), pages 115-123, 01.
  14. Stephen P. A. Brown and Mine K. Yucel, 2009. "Market Arbitrage: European and North American Natural Gas Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 167-186.
  15. Aguilar, Francisco X. & Goerndt, Michael E. & Song, Nianfu & Shifley, Stephen, 2012. "Internal, external and location factors influencing cofiring of biomass with coal in the U.S. northern region," Energy Economics, Elsevier, vol. 34(6), pages 1790-1798.
  16. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
  17. Anne Neumann, 2009. "Linking Natural Gas Markets - Is LNG Doing its Job?," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 187-200.
  18. 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.
  19. Chaton, Corinne & Gasmi, Farid & Guillerminet, Marie-Laure & Oviedo, Juan Daniel, 2010. "Gas Release and Transport Capacity Investment as Instruments to Foster Competition in Gas Markets," TSE Working Papers 10-203, Toulouse School of Economics (TSE).
  20. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
  21. Paul Berhanu Girma & Albert S. Paulson, 1999. "Risk arbitrage opportunities in petroleum futures spreads," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 19(8), pages 931-955, December.
  22. repec:dau:papers:123456789/11504 is not listed on IDEAS
  23. Frank Asche, Petter Osmundsen, Ragnar Tveteras, 2001. "Market integration for natural gas in Europe," International Journal of Global Energy Issues, Inderscience Enterprises Ltd, vol. 16(4), pages 300-312.
  24. Gjolberg, Ole & Johnsen, Thore, 1999. "Risk management in the oil industry: can information on long-run equilibrium prices be utilized?," Energy Economics, Elsevier, vol. 21(6), pages 517-527, December.
  25. Apostolos Serletis & John Herbert, 2007. "The Message in North American Energy Prices," World Scientific Book Chapters, in: Quantitative And Empirical Analysis Of Energy Markets, chapter 13, pages 156-171 World Scientific Publishing Co. Pte. Ltd..
  26. De Vany, Arthur & Walls, W. David, 1993. "Pipeline Access and Market Integration in the Natural Gas Industry: Evidence from Cointegration Tests," University of California Transportation Center, Working Papers qt8368m144, University of California Transportation Center.
  27. Frank Asche & Odd Bjarte Nilsen & Ragnar Tveteras, 2008. "Natural Gas Demand in the European Household Sector," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 27-46.
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