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Revisiting the Drivers of Natural Gas Prices. A replication study of Brown & Yücel (The Energy Journal, 2008)*

* This paper is a replication of an original study

Author

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  • Roberts, Gavin

Abstract

This paper replicates the analysis in the paper 'What Drives Natural Gas Prices?" by Stephen P.A. Brown and Mine K. Yücel. The replication confirms the results of that analysis: a long-run relationship existed between natural-gas prices and crude-oil prices during the period from June 1997 to June 2007. This relationship was primarily driven by crude-oil prices, as natural-gas prices adjusted to deviations from the long-run relationship. Controlling for exogenous covariates related to weather, seasonality, and supply disruptions strengthen the price relationship between these two commodities. When the sample is expanded to include data generated as recently as June 2017, evidence of the long-run relationship disappears completely. I posit that this results from increased U.S. natural-supply associated with the 'shale revolution'.

Suggested Citation

  • Roberts, Gavin, 2019. "Revisiting the Drivers of Natural Gas Prices. A replication study of Brown & Yücel (The Energy Journal, 2008)," International Journal for Re-Views in Empirical Economics (IREE), ZBW - Leibniz Information Centre for Economics, vol. 3(2019-2), pages 1-24.
    • Handle: RePEc:zbw:ireejl:206818
    DOI: 10.18718/81781.11
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    References listed on IDEAS

    as
    1. Stephen P. A. Brown & Mine K. Yucel, 2008. "What Drives Natural Gas Prices?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 45-60.
    2. Nick, Sebastian & Thoenes, Stefan, 2014. "What drives natural gas prices? — A structural VAR approach," Energy Economics, Elsevier, vol. 45(C), pages 517-527.
    3. Brigida, Matthew, 2014. "The switching relationship between natural gas and crude oil prices," Energy Economics, Elsevier, vol. 43(C), pages 48-55.
    4. Erdős, Péter, 2012. "Have oil and gas prices got separated?," Energy Policy, Elsevier, vol. 49(C), pages 707-718.
    5. Pettersson, Fredrik & Söderholm, Patrik & Lundmark, Robert, 2012. "Fuel switching and climate and energy policies in the European power generation sector: A generalized Leontief model," Energy Economics, Elsevier, vol. 34(4), pages 1064-1073.
    6. Hongxun Liu & Jianglong Li, 2018. "The US Shale Gas Revolution and Its Externality on Crude Oil Prices: A Counterfactual Analysis," Sustainability, MDPI, vol. 10(3), pages 1-17, March.
    7. Lee, Dongin & Schmidt, Peter, 1996. "On the power of the KPSS test of stationarity against fractionally-integrated alternatives," Journal of Econometrics, Elsevier, vol. 73(1), pages 285-302, July.
    8. Caporin, Massimiliano & Fontini, Fulvio, 2017. "The long-run oil–natural gas price relationship and the shale gas revolution," Energy Economics, Elsevier, vol. 64(C), pages 511-519.
    9. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
    10. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
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    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Jerzy Rembeza & Kamila Radlińska, 2020. "Price Linkages Between Tea Markets: A Case Study for Colombo, Kolkata and Mombasa Auctions," European Research Studies Journal, European Research Studies Journal, vol. 0(2), pages 134-150.
    2. Saleh Mothana Obadi & Matej Korcek, 2020. "Driving Fundamentals of Natural Gas Price in Europe," International Journal of Energy Economics and Policy, Econjournals, vol. 10(6), pages 318-324.

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    Replication

    This item is a replication of:
  • Brown, Stephen P.A. & Yücel, Mine K., 2008. "Deliverability and regional pricing in U.S. natural gas markets," Energy Economics, Elsevier, vol. 30(5), pages 2441-2453, September.

    • More about this item

    Keywords

    energy; crude oil; natural gas; cointegration; replication study;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • F18 - International Economics - - Trade - - - Trade and Environment
    • F59 - International Economics - - International Relations, National Security, and International Political Economy - - - Other
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

    Lists

    This item is featured on the following reading lists, Wikipedia, or ReplicationWiki pages:
    1. Revisiting the Drivers of Natural Gas Prices. A replication study of Brown & Yücel (The Energy Journal, 2008) (Int J Re-Views in Emp Econ 2019) in ReplicationWiki

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