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A Tripolar Model of Gas Price Formation in Germany. Does the Shale Revolution in the US Matter?

Author

Listed:
  • Moenke Anna

    (Warsaw School of Economics, Al. Niepodleglosci 162, 02-554, Warszawa, Poland)

  • Welfe Aleksander

    (Chair of Econometric Models and Forecasts, University of Lodz, 37/39 Rewolucji 1905r., 90-214, Łódź, Poland)

Abstract

Presented analysis of gas price formation mechanism in Germany was prompted by changes brought about by technological advancements and the liberalization and harmonization of natural gas markets in the European Union after the year 2000. Because the data used in the study is generated by nonstationary stochastic processes, the cointegrated vector autoregressive model was applied as the most appropriate. The analysis pointed out that the price of natural gas, oil and the USD/EUR exchange rate influence each other in the long run and thus should be modelled together. Gas price in Germany is driven by both fundamental and financial factors, and so it rises with economic expansion, oil price increases, and the depreciation of the USD. It also reacts to changes in short-term interest rates and the volume of gas production in the US, which confirms that the shale revolution in this country has been consequential for gas prices in Europe, like any other supply shock would have been.

Suggested Citation

  • Moenke Anna & Welfe Aleksander, 2022. "A Tripolar Model of Gas Price Formation in Germany. Does the Shale Revolution in the US Matter?," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 242(4), pages 501-520, August.
    • Handle: RePEc:jns:jbstat:v:242:y:2022:i:4:p:501-520:n:5
    DOI: 10.1515/jbnst-2022-0002
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    More about this item

    Keywords

    gas price determinants; German natural gas market; shale revolution; CVAR model;
    All these keywords.

    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
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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