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Price Convergence Across Natural Gas Fields and City Markets

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  • W. David Walls

Abstract

This research reports the results of cointegration tests between natural gas spot prices at various production fields, pipeline hubs, and city markets. Cointegration between prices is evidence that spatial arbitrage is enforcing the law of one price across market locations. The results show that prices at certain city markets, Chicago and to a lesser extent California, are cointegrated with prices at field markets. However, the prices at most other locations do not move in step with gas prices in the field markets. Customer access to pipeline transportation, or competitive bypass, may explain why prices at some city markets are more responsive to production field prices than others.

Suggested Citation

  • W. David Walls, 1994. "Price Convergence Across Natural Gas Fields and City Markets," The Energy Journal, , vol. 15(4), pages 37-48, October.
    • Handle: RePEc:sae:enejou:v:15:y:1994:i:4:p:37-48
    DOI: 10.5547/ISSN0195-6574-EJ-Vol15-No4-3
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    References listed on IDEAS

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    1. repec:aen:journl:1993v14-04-a01 is not listed on IDEAS
    2. Wojciech W. Charemza & Derek F. Deadman, 1992. "New Directions In Econometric Practice," Books, Edward Elgar Publishing, number 84, June.
    3. Arthur De Vany & W. David Walls, 1993. "Pipeline Access and Market Integration in the Natural Gas Industry: Evidence from Cointegration Tests," The Energy Journal, , vol. 14(4), pages 1-19, October.
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