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Testing for Market Integration Crude Oil, Coal, and Natural Gas

Author

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  • Lance J. Bachmeier
  • James M. Griffin

Abstract

Prompted by the contemporaneous spike in coal, oil, and natural gas prices, this paper evaluates the degree of market integration both within and between crude oil, coal, and natural gas markets. Our approach yields parameters that can be readily tested against a priori conjectures. Using daily price data for five very different crude oils, we conclude that the world oil market is a single, highly integrated economic market. On the other hand, coal prices at five trading locations across the United States are cointegrated, but the degree of market integration is much weaker, particularly between Western and Eastern coals. Finally, we show that crude oil, coal, and natural gas markets are only very weakly integrated. Our results indicate that there is not a primary energy market. Despite current price peaks, it is not useful to think of a primary energy market, except in a very long run context.

Suggested Citation

  • Lance J. Bachmeier & James M. Griffin, 2006. "Testing for Market Integration Crude Oil, Coal, and Natural Gas," The Energy Journal, , vol. 27(2), pages 55-71, April.
    • Handle: RePEc:sae:enejou:v:27:y:2006:i:2:p:55-71
    DOI: 10.5547/ISSN0195-6574-EJ-Vol27-No2-4
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    References listed on IDEAS

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    Citations

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    Cited by:

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    4. Zhang, Lei, 2025. "A comprehensive analysis of natural gas reserve policies: Global comparison, quantitative analysis, and strategic insights," Energy, Elsevier, vol. 320(C).
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    6. Wang, Xinya & Rong, Xueyun & Yin, Lei, 2024. "Discerning the impact of global geopolitical risks on China's energy futures market spillovers: Evidence from higher-order moments," Energy Economics, Elsevier, vol. 140(C).
    7. Amady Léchenet, 2025. "European electricity wholesale price convergence: Investigating Flow-Based Market Coupling efficiency," EconomiX Working Papers 2025-41, University of Paris Nanterre, EconomiX.
    8. Matteo Gardini & Edoardo Santilli, 2025. "A Heath–Jarrow–Morton framework for energy markets: review and applications for practitioners," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 48(1), pages 603-642, June.
    9. Monteux, Manou & Arcuri, Maria Cristina & Gandolfi, Gino & Caselli, Stefano, 2025. "Can extreme weather forecasts lead to a risk premium? Evidence of a non-linear response in U.S. natural gas futures," The North American Journal of Economics and Finance, Elsevier, vol. 80(C).

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