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The Global Financial Crisis (GFC) of 2007-2009 that originated in the US has revealed the need for measuring and monitoring the transmission of extreme downside market risk. This paper investigates the risk transmission mechanism between the oil and natural gas markets. We apply the recently introduced test statistics based on cross-quantilogram function and the multivariate quantile regression model (VAR for VaR) to the US oil and natural gas prices, which are independently formed. Our results show two asymmetric patterns. First, the shocks in the oil market substantially increase the Value at Risk (VaR) in the natural gas market. However, the reverse impact does not exist. Second, we highlight the significant asymmetric response of gains and losses transmission in energy markets, cautioning about the underlying weakness of adopting volatility to measure risk in the energy market. Moreover, extreme market risk is more easily transmitted across markets than moderate risk. Our results are in general robust in application to other regional energy markets, such as Europe and Asia, but the heterogeneities in responses are underpinned by the differing role of natural gas in regions. The findings in this paper have important implications for academic researchers, policy makers in gas-dependent economies, and business practitioners in light of projected increases in the use of natural gas worldwide as well as development of independent gas-on-gas competitive prices in Asia.

Ship stowage plan is the management connection of quae

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In the process of transferring from oil indexation to competitive pricing for natural gas, the number of potential gas trading hubs that underpin the competitive prices is a key question, but lack of empirical investigations. This study employs a Structure Vector Autoregression model (SVAR) and monthly LNG price data of four East Asian importers to examine whether the natural gas markets are integrated among them. The study finds that LNG markets are fragmented and thus there are different market fundamentals in the four examined markets. The results suggest that there should be multiple LNG benchmark trading hubs at the time being so that each hub could reflect different fundamentals. Since gas trading hubs in different markets are not exclusive, governments and gas industry in East Asia should collaborate in hub building because they face common challenges in the process.

Cutting the overcapacity in coal industry is a current critical issue in China and is a matter for the world. However, inappropriate capacity cut policies may induce huge fluctuations of energy price, creating a threat to energy security and even economic stability. This paper designs a capacity permit trading scheme to minimize the compliance cost of production capacity cut, and proposes the operational details of capacity permit trading scheme using China’s coal industry as an example. We also construct a simple partial equilibrium model to examine the benefits and firm behaviors when adopting the permit trading scheme. The results demonstrate that the permit trading scheme will generate an overall positive social welfare as well as reduce firms’ cheating incentives. The results confirm that the more heterogeneous the firms are in terms of compliance costs, the higher will be the social welfare gains and the trade volume. Our findings show that the proposed permit trading scheme is feasible and beneficial in achieving the capacity cut target in China.