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The pricing of natural gas in U.S. markets

Author

Listed:
  • Stephen P.A. Brown
  • Mine K. Yücel

Abstract

Stephen Brown and Mine Yücel examine how different natural gas users and the market institutions serving them affect the transmission of price changes throughout various markets for natural gas. Electrical utilities and industrial users buy much of their natural gas in a competitive spot market served by brokers and interstate pipeline companies. In contrast, most commercial and residential customers are dependent on local distribution companies, which earn a regulated rate of return and buy their gas under long-term contracts. ; Using time-series methods, Brown and Yücel find that even in the long run, changes in prices are not transmitted uniformly throughout the various markets for natural gas. Electrical and industrial customers have seen a greater benefit from falling natural gas prices than commercial and residential customers. Differences in market institutions and in the ability of the end users to switch fuels may account for the lack of uniformity.

Suggested Citation

  • Stephen P.A. Brown & Mine K. Yücel, 1993. "The pricing of natural gas in U.S. markets," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Apr, pages 41-51.
  • Handle: RePEc:fip:fedder:y:1993:i:apr:p:41-51
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    File URL: http://www.dallasfed.org/assets/documents/research/er/1993/er9302c.pdf
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    References listed on IDEAS

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    1. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
    2. Stock, James H & Watson, Mark W, 1988. "Variable Trends in Economic Time Series," Journal of Economic Perspectives, American Economic Association, vol. 2(3), pages 147-174, Summer.
    3. Jerome Ellig & Jack High, 1992. "Social Contracts And Pipe Dreams," Contemporary Economic Policy, Western Economic Association International, vol. 10(1), pages 39-51, January.
    4. Engle, Robert F. & Yoo, Byung Sam, 1987. "Forecasting and testing in co-integrated systems," Journal of Econometrics, Elsevier, vol. 35(1), pages 143-159, May.
    5. Sims, Christopher A & Stock, James H & Watson, Mark W, 1990. "Inference in Linear Time Series Models with Some Unit Roots," Econometrica, Econometric Society, vol. 58(1), pages 113-144, January.
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    Citations

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    Cited by:

    1. 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).
    2. Brown, Stephen P.A. & Yücel, Mine K., 2008. "Deliverability and regional pricing in U.S. natural gas markets," Energy Economics, Elsevier, vol. 30(5), pages 2441-2453, September.
    3. Mohammadi, Hassan, 2011. "Market integration and price transmission in the U.S. natural gas market: From the wellhead to end use markets," Energy Economics, Elsevier, vol. 33(2), pages 227-235, March.

    More about this item

    Keywords

    Power resources - Prices;

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