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Is There an East-West Split in North American Natural Gas Markets?

Abstract:
This paper presents evidence concerning shared stochastic trends in North American natural gas (spot) markets, using monthly data for the period that natural gas has been traded on organized exchanges (from June, 1990 to January, 1996). In doing so, it uses the Engle and Granger (1987) approach for estimating bivariate cointegrating relationships as well as Johansen's (1988) maximum likelihood approach for estimating cointegrating relationships in multivariate vector autoregressive models. The results indicate that the east-west split does not exist.

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Energy Specializations: Energy Modeling – Energy Data, Modeling, and Policy Analysis; Natural Gas – Markets and Prices; Natural Gas – Policy and Regulation

JEL Codes: Q41: Energy: Demand and Supply; Prices, Q35: Hydrocarbon Resources, Q40: Energy: General, L95: Gas Utilities; Pipelines; Water Utilities, Q38: Nonrenewable Resources and Conservation: Government Policy

Keywords: Natural gas markets, cointegration, gas price behavior, North America, spot prices

DOI: 10.5547/ISSN0195-6574-EJ-Vol18-No1-2

Published in Volume18, Number 1 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.

 

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