Volatility Spillovers in Energy Markets

Abstract

We investigate the extent and evolution of the links between energy markets using a broad data set consisting of a total of 17 series of prices for commodities such as electricity, natural gas, coal, oil and carbon. The results shed light on a number of relevant issues such as the volatility spillover effect in energy markets (within and across sectors) and the identification of those markets that are exporters (importers) of volatility to (from) other markets, as well as evidence of the time-varying nature of these effects. The main conclusions are: (i) the most integrated European electricity markets appear to be those of Germany, France and the Netherlands; (ii) the Dutch Title Transfer Facility might be on the way to becoming the benchmark price for natural gas in Europe, and (iii) natural gas may be replacing crude oil as the global benchmark price for energy commodities.

Is the Price Cap for Gas Useful? Evidence from European Countries

“…In particular, when the gas prices (black line) reach is peak around the half of 2022, electricity prices (red line) show a peak of around 700 Euros. This connection is also confirmed by the recent commodities literature and in detail Chuliá et al (2019) investigate the extent and evolution of the links between energy markets such as electricity, natural gas, coal, oil and carbon. The strong connection between natural gas and electricity has been studied through factors (Hirth, 2018) or the spark spread risk management using electricity and natural gas futures (Martínez and Torró, 2018).…”

Financial modelling, risk management of energy instruments and the role of cryptocurrencies

“…Baek et al (2005) Reserve Economic Data (https://fred.stlouisfed.org/). Noticeably, we focus on the developed regions only, specifically, the US and EU crude oil markets due to the large proportion of these developed economies in global crude oil market (Chuliá et al, 2019). Furthermore, Jin et al (2012) also indicated that Dubai crude oil has similar properties to Brent.…”

Key problems of gas‐fired power plants participating in peak load regulation: A review

“…Under such mechanism, crude oil price serves as the benchmark for natural gas pricing [81]. With the establishment of several natural gas trading centres in various countries, for example, the United Kingdom [82], the Netherlands [83], Germany [84] and Belgium [85], gas-on-gas competitive pricing mechanism and oil-indexation pricing mechanism are adopted by the natural gas market in Europe. At present, gas-on-gas competitive pricing mechanism, which is adopted in Northwest Europe, has significant advantages that can introduce market competition mechanism and achieve optimal allocation of natural gas.…”