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The UK Market for Natural Gas, Oil and Electricity: Are the Prices Decoupled?

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  • Frank Asche
  • Petter Osmundsen
  • Maria Sandsmark

Abstract

After opening up of the Interconnector, the liberalized UK natural gas market and the regulated Continental gas markets became physically integrated and the Continental gas price became dominant. However, in an interim period - after deregulation of the UK gas market (1995) and the opening up of the Interconnector (1998) - the UK gas market had neither government price regulation nor a physical Continental gas linkage. We use this period - which for natural gas markets displays an unusual combination of deregulation and autarky - as a natural experiment to explore if decoupling of natural gas prices from prices of other energy commodities, such as oil and electricity, took place. Monthly price data in the period 1995-1998 indicates a highly integrated market where wholesale demand seems to be for energy rather than a specific energy source.

Suggested Citation

  • Frank Asche & Petter Osmundsen & Maria Sandsmark, 2006. "The UK Market for Natural Gas, Oil and Electricity: Are the Prices Decoupled?," The Energy Journal, , vol. 27(2), pages 27-40, April.
    • Handle: RePEc:sae:enejou:v:27:y:2006:i:2:p:27-40
    DOI: 10.5547/ISSN0195-6574-EJ-Vol27-No2-2
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    More about this item

    Keywords

    Natural gas; oil; electricity; energy markets market integration; cointegration; UK.;
    All these keywords.

    JEL classification:

    • F0 - International Economics - - General

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