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The Supply of Storage for Natural Gas in California

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  • Rocío Uría
  • Jeffrey Williams

Abstract

Do natural gas storage decisions in distant California respond to NYMEX futures price spreads? Daily data about flows into and out of storage facilities in California over 2002-2006 and daily spreads on NYMEX are used to investigate whether the net injection profile is consistent with the “supply-of-storage†curve first observed by Working for wheat. Storage decisions in California do seem to be influenced by a price signal that combines the intertemporal spread and the locational basis between California and the Henry Hub, in addition to strong seasonal and weekly cycles that determine net injections to a considerable extent. The timing and magnitude of the price response differ across storage facilities. Regulatory requirements and operational constraints also limit the response to short-lived arbitrage opportunities.

Suggested Citation

  • Rocío Uría & Jeffrey Williams, 2007. "The Supply of Storage for Natural Gas in California," The Energy Journal, , vol. 28(3), pages 31-50, July.
    • Handle: RePEc:sae:enejou:v:28:y:2007:i:3:p:31-50
    DOI: 10.5547/ISSN0195-6574-EJ-Vol28-No3-3
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    References listed on IDEAS

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    1. Emile J. Brinkmann & Ramon Rabinovitch, 1995. "Regional Limitations on the Hedging Effectiveness of Natural Gas Futures," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 113-124.
    2. Scott C. Linn & Zhen Zhu, 2004. "Natural gas prices and the gas storage report: Public news and volatility in energy futures markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 24(3), pages 283-313, March.
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