IAEE Members and subscribers to The Energy Journal: Please log in to access the full text article or receive discounted pricing for this article.

Financial Stress and Basis in Energy Markets

We investigate the relationship between energy commodities bases, inventory and financial stress from 1994 to 2018. We find that, from the 1998 Asian crisis the effect of financial stress on energy commodities bases gradually increased and from the 2008 crisis became positive, while the effect of inventory showed a gradual decline over time. The reactions of bases to changes in financial stress is nonlinear, as they are higher in the high financial stress periods. This is more profound in crude oil market than heating oil and natural gas. Moreover, the reactions of bases to the changes in inventory is nonlinear, as the reactions are lower when the inventory level is high confirming the theory of storage. We suggest that, in energy market, changes of inventory do not fully explain the variation of energy commodities bases, as the connection between commodity and financial markets increased during the recent years.

Download Executive Summary Purchase ( $25 )

Keywords: Energy market bases, Financial stress, Inventories

DOI: 10.5547/01956574.42.5.nbeh

References: Reference information is available for this article. Join IAEE, log in, or purchase the article to view reference data.

Published in Volume 42, Number 5 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.


© 2023 International Association for Energy Economics | Privacy Policy | Return Policy