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Oil And Gas Markets In The Uk: Evidence For From A Cointegrating Approach

  • Theodore Panagiotidis

    (Loughborough University)

  • Emilie Rutledge

    (Durham University)

The paper examines the relationship between UK wholesale gas prices and the Brent oil price over the period 1996-2003. Tests for Unit Roots and Cointegration are carried out and it is discovered that a long run equilibrium relationship between UK gas and oil prices predates the opening of the UK-Mainland Europe Inter-connector. Following a recursive methodology (Hansen & Johansen 1999), it was found that the cointegrating relationship is present throughout the sample period. However, the long run solutions seem to be more volatile. Evidence is provided that the short run relationship is linear and impulse response functions are used to examine the effects that a shock in oil would have on gas.

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File URL: http://econwpa.repec.org/eps/em/papers/0504/0504004.pdf
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Paper provided by EconWPA in its series Econometrics with number 0504004.

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Length: 31 pages
Date of creation: 15 Apr 2005
Date of revision:
Handle: RePEc:wpa:wuwpem:0504004
Note: Type of Document - pdf; pages: 31
Contact details of provider: Web page: http://econwpa.repec.org

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  1. David F. Hendry & Katarina Juselius, 2000. "Explaining Cointegration Analysis: Part 1," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 1-42.
  2. De Vany, Arthur S. & Walls, W. David, 1999. "Cointegration analysis of spot electricity prices: insights on transmission efficiency in the western US," Energy Economics, Elsevier, vol. 21(5), pages 435-448, October.
  3. Henrik Hansen & Søren Johansen, 1999. "Some tests for parameter constancy in cointegrated VAR-models," Econometrics Journal, Royal Economic Society, vol. 2(2), pages 306-333.
  4. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
  5. Brock, W.A. & Dechert, W.D. & LeBaron, B. & Scheinkman, J.A., 1995. "A Test for Independence Based on the Correlation Dimension," Working papers 9520, Wisconsin Madison - Social Systems.
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