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How does the U.S. natural gas market react to demand and supply shocks in the crude oil market?

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  • Jadidzadeh, Ali
  • Serletis, Apostolos

Abstract

In this paper we use monthly data (over the period from January 1976 to December 2012) and a structural VAR model to disentangle demand and supply shocks in the global crude oil market and investigate their effects on the real price of natural gas in the United States. We identify the model by assuming that innovations to the real price of crude oil are predetermined with respect to the natural gas market and show that close to 45% of the variation in the real price of natural gas can be attributed to structural supply and demand shocks in the global crude oil market.

Suggested Citation

  • Jadidzadeh, Ali & Serletis, Apostolos, 2017. "How does the U.S. natural gas market react to demand and supply shocks in the crude oil market?," Energy Economics, Elsevier, vol. 63(C), pages 66-74.
  • Handle: RePEc:eee:eneeco:v:63:y:2017:i:c:p:66-74
    DOI: 10.1016/j.eneco.2017.01.007
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    2. repec:kap:openec:v:29:y:2018:i:2:d:10.1007_s11079-017-9454-z is not listed on IDEAS
    3. repec:eee:eneeco:v:74:y:2018:i:c:p:208-251 is not listed on IDEAS
    4. Ribeiro Scarcioffolo, Alexandre & Etienne, Xiaoli L., 2018. "Does Economic Policy Uncertainty Affect Energy Market Volatility and Vice-Versa?," 2018 Annual Meeting, August 5-7, Washington, D.C. 273976, Agricultural and Applied Economics Association.
    5. repec:eee:energy:v:158:y:2018:i:c:p:890-898 is not listed on IDEAS
    6. Bao H. NGUYEN & OKIMOTO Tatsuyoshi, 2017. "Asymmetric Reactions of the U.S. Natural Gas Market and Economic Activity," Discussion papers 17102, Research Institute of Economy, Trade and Industry (RIETI).
    7. repec:gam:jeners:v:11:y:2018:i:10:p:2757-:d:175678 is not listed on IDEAS
    8. Bao H. NGUYEN & OKIMOTO Tatsuyoshi & Trung Duc TRAN, 2019. "Uncertainty-Dependent and Sign-Dependent Effects of Oil Market Shocks," Discussion papers 19042, Research Institute of Economy, Trade and Industry (RIETI).
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    11. repec:eee:eneeco:v:75:y:2018:i:c:p:71-84 is not listed on IDEAS
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    More about this item

    Keywords

    Oil price; Oil price shocks; Structural VAR;

    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
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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