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Time Commitments in LNG Shipping and Natural Gas Price Convergence

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Listed:
  • Atle Oglend
  • Petter Osmundsen
  • Tore Selland Kleppe

Abstract

Inter-continental Liquefied Natural Gas (LNG) trade can facilitate the development of a global natural gas market. However, in addition to explicit shipping costs, such trade requires time commitments in shipping due to the long hauls of many shipping routes. We show that this time commitment adds an additional economic cost to LNG shipping, and creates a positive relationship between the economic cost of LNG trade and regional natural gas price spreads. Necessary time commitment therefore augments the other costs of LNG trade, and contributes to weaken the ties between global natural gas markets.

Suggested Citation

  • Atle Oglend & Petter Osmundsen & Tore Selland Kleppe, 2020. "Time Commitments in LNG Shipping and Natural Gas Price Convergence," The Energy Journal, , vol. 41(2), pages 29-46, March.
    • Handle: RePEc:sae:enejou:v:41:y:2020:i:2:p:29-46
    DOI: 10.5547/01956574.41.2.aogl
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    References listed on IDEAS

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    1. Atle Oglend & Morten E. Lindback & Petter Osmundsen, 2016. "Shale Gas Boom Affecting the Relationship Between LPG and Oil Prices," The Energy Journal, , vol. 37(1), pages 211-232, January.
    2. Yoo, Byeong-Yong, 2017. "Economic assessment of liquefied natural gas (LNG) as a marine fuel for CO2 carriers compared to marine gas oil (MGO)," Energy, Elsevier, vol. 121(C), pages 772-780.
    3. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 33(1), pages 125-132.
    4. Frank Asche & Petter Osmundsen & Maria Sandsmark, 2006. "The UK Market for Natural Gas, Oil and Electricity: Are the Prices Decoupled?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 27-40.
    5. Oglend, Atle & Kleppe, Tore Selland & Osmundsen, Petter, 2016. "Trade with endogenous transportation costs: The case of liquefied natural gas," Energy Economics, Elsevier, vol. 59(C), pages 138-148.
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    Cited by:

    1. Hupka, Yuri & Popova, Ivilina & Simkins, Betty & Lee, Thomas, 2023. "A review of the literature on LNG: Hubs development, market integration, and price discovery," Journal of Commodity Markets, Elsevier, vol. 31(C).

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    More about this item

    Keywords

    LNG; Natural gas; Trade; Price convergence;
    All these keywords.

    JEL classification:

    • F0 - International Economics - - General

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