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Linking Natural Gas Markets: Is LNG Doing Its Job?

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  • Anne Neumann

Abstract

The increase in liquefied natural gas trade has accelerated the integration of previously segmented markets in North America, Europe, and Asia. This paper provides evidence on the integration of the transatlantic natural gas market. We test the theoretical proposition that in integrating markets commodity prices should move closer than before. Using 2,059 pairs of daily spot prices for natural gas in North America and Europe we investigate price dynamics covering the period from 1999 until 2008. We apply the Kalman Filter technique to gain detailed information on trends inherent over time. Results suggest an increasing convergence of spot prices on either side of the Atlantic Basin.

Suggested Citation

  • Anne Neumann, 2008. "Linking Natural Gas Markets: Is LNG Doing Its Job?," Discussion Papers of DIW Berlin 822, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp822
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    References listed on IDEAS

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    Cited by:

    1. Robert A. Ritz, 2013. "Price discrimination and limits to arbitrage in global LNG markets," Working Papers EPRG 1317, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    2. Feng, Sida & Li, Huajiao & Qi, Yabin & Guan, Qing & Wen, Shaobo, 2017. "Who will build new trade relations? Finding potential relations in international liquefied natural gas trade," Energy, Elsevier, vol. 141(C), pages 1226-1238.
    3. Osorio-Tejada, Jose Luis & Llera-Sastresa, Eva & Scarpellini, Sabina, 2017. "Liquefied natural gas: Could it be a reliable option for road freight transport in the EU?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 71(C), pages 785-795.
    4. Hamed Nikhalat‐Jahromi & Dalila B.M.M. Fontes & Robert A. Cochrane, 2017. "Future liquefied natural gas business structure: a review and comparison of oil and liquefied natural gas sectors," Wiley Interdisciplinary Reviews: Energy and Environment, Wiley Blackwell, vol. 6(4), July.
    5. Péter Erdős & Mihály Ormos, 2012. "Natural Gas Prices on Three Continents," Energies, MDPI, vol. 5(10), pages 1-17, October.
    6. Foster, John & Wagner, Liam & Liebman, Ariel, 2015. "Modelling the Electricity and Natural Gas Sectors for the Future Grid: Developing Co-Optimisation Platforms for Market Redesign," MPRA Paper 70114, University Library of Munich, Germany.
    7. Misund, Bård & Oglend, Atle, 2016. "Supply and demand determinants of natural gas price volatility in the U.K.: A vector autoregression approach," Energy, Elsevier, vol. 111(C), pages 178-189.
    8. Øglend, Atle & Osmundsen, Petter & Kleppe, Tore Selland, 2015. "Trade with Endogenous Transportation Costs: The Value of LNG Exports," UiS Working Papers in Economics and Finance 2015/5, University of Stavanger.
    9. Sebastian Nick & Benjamin Tischler, 2014. "The Law of one Price in Global Natural Gas Markets - A Threshold Cointegration Analysis," EWI Working Papers 2014-16, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    10. Asche, Frank & Dahl, Roy Endre & Oglend, Atle, 2013. "Value-at-Risk: Risk assessment for the portfolio of oil and gas producers," UiS Working Papers in Economics and Finance 2013/3, University of Stavanger.

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    Keywords

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    JEL classification:

    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
    • Q49 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Other
    • F15 - International Economics - - Trade - - - Economic Integration

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