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Modeling natural gas price volatility: The case of the UK gas market

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  • van Goor, Harm
  • Scholtens, Bert

Abstract

We investigate if and how gas price volatility can be explained on the basis of market fundamentals. We depart from the Kanamura (2009) supply and demand based volatility model. We generalize this model to account for a variety of demand and supply relationships. We investigate daily natural gas prices in the UK in the 21st century. We find that different supply curves exist in particular sub periods and we establish the presence of various leverage effects. We conclude that supply and demand based volatility models relying on different supply assumptions provide a sound theoretical and economic foundation for using GARCH models in the UK gas market.

Suggested Citation

  • van Goor, Harm & Scholtens, Bert, 2014. "Modeling natural gas price volatility: The case of the UK gas market," Energy, Elsevier, vol. 72(C), pages 126-134.
  • Handle: RePEc:eee:energy:v:72:y:2014:i:c:p:126-134
    DOI: 10.1016/j.energy.2014.05.016
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    References listed on IDEAS

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    Cited by:

    1. Díaz, Guzmán & Planas, Estefanía & Andreu, Jon & Kortabarria, Iñigo, 2015. "Joint cost of energy under an optimal economic policy of hybrid power systems subject to uncertainty," Energy, Elsevier, vol. 88(C), pages 837-848.
    2. Geng, Jiang-Bo & Ji, Qiang & Fan, Ying, 2016. "The behaviour mechanism analysis of regional natural gas prices: A multi-scale perspective," Energy, Elsevier, vol. 101(C), pages 266-277.
    3. Misund, Bård & Oglend, Atle, 2016. "Supply and demand determinants of natural gas price volatility in the U.K.: A vector autoregression approach," Energy, Elsevier, vol. 111(C), pages 178-189.
    4. repec:eee:energy:v:155:y:2018:i:c:p:462-473 is not listed on IDEAS
    5. Sun, Mei & Wang, Yaqi & Gao, Cuixia, 2016. "Visibility graph network analysis of natural gas price: The case of North American market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 462(C), pages 1-11.
    6. Sheikhi, Aras & Bahrami, Shahab & Ranjbar, Ali Mohammad, 2015. "An autonomous demand response program for electricity and natural gas networks in smart energy hubs," Energy, Elsevier, vol. 89(C), pages 490-499.
    7. Xiaopeng Guo & Yanan Wei & Jiahai Yuan, 2016. "Will the Steam Coal Price Rebound under the New Economy Normalcy in China?," Energies, MDPI, Open Access Journal, vol. 9(9), pages 1-13, September.
    8. Díaz, Guzmán & Moreno, Blanca, 2016. "Valuation under uncertain energy prices and load demands of micro-CHP plants supplemented by optimally switched thermal energy storage," Applied Energy, Elsevier, vol. 177(C), pages 553-569.

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