Linking Natural Gas Markets - Is LNG Doing its Job?

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThe 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.

The spillover effects across natural gas and oil markets: Based on the VEC–MGARCH framework

“…They all find that natural gas markets at the regional level have been progressively integrated. With the increase in liquefied natural gas (LNG) trade, the global integration of segmented markets in Europe, North America and Asia have been accelerated [36]. Siliverstovs et al [37] focused on natural gas market integration in Europe, North America and Japan from a global perspective using the principal components analysis and cointegration procedure.…”

“…Using GARCH-based models, Karali and Ramirez [16], Narayan and Sharma [18] and Arouri et al [39] developed tests for volatility spillover in energy and financial markets. Other literature including Wang and Wu [40], Asche et al [41], Erd} os [2] and Neumann [36] studied price spillover using co-integration and VEC models. The difference between this paper and existing literature is that we propose a comprehensive framework for examining spillover effects in price and volatility by combining VEC and MGARCH techniques.…”

What's the story with natural gas markets in Europe? Empirical evidence from spot trade data

“…The empirical work in the field of natural gas prices in North America and Europe argues that market integration can be measured by the level of price integration (see [7] an [12] for more extensive literature reviews). Given that the dynamic relation between prices catches the development of a single market we choose a time-varying coefficient estimation approach.…”

“…Given that stationarity of price differentials can imply both full market integration and price convergence, we use the concept of price convergence to determine the recent developments of prices (p i ) at eight European trading places for natural gas. Integration of markets can be measured by the logged ratio of prices [12]:…”

Cooperation among liquefied natural gas suppliers: Is rationalization the sole objective?

“…Yepes Rodríguez (2008) for an appropriate valuation of destination flexibility). Recent empirical evidence suggests that these arbitrages could prop up a regional price convergence across the Atlantic basin (Neumann, 2009). However, Brown and Yücel (2009) also note that variations in crude oil prices could also explain those apparent coordinated movements in natural gas prices.…”