Have oil and gas prices got separated?
Journal
Energy Policy
ISSN
0301-4215
ISSN-Digital
1873-6777
Type
journal article
Date Issued
2012-10
Author(s)
Erdös, Péter
Abstract
This paper applies vector error correction models that show that oil and natural gasprices decoupled around 2009. Before 2009, US and UK gasprices had a long-term equilibrium with crude prices to which gasprices always reverted after exogenous shocks. Both US and UK gasprices adjusted to the crude oilprice individually, and departure from the equilibrium gasprice on one continent resulted in a similar departure on the other. After an exogenous shock, the adjustment between US and UK gasprices took approximately 20 weeks on average, and the convergence was mediated mainly by crude oil with a necessary condition that arbitrage across the Atlantic was possible. After 2009, however, the UK gasprice has remained integrated with oilprice, but the US gasprice decoupled from crude oilprice and the European gasprice, as the Atlantic arbitrage has halted. The oversupply from shale gas production has not been mitigated by North American export, as there has been no liquefying and export capacity.
Language
English
Keywords
Gasprices
Oilprices
Atlantic arbitrage
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Elsevier
Publisher place
Amsterdam
Volume
49
Number
10
Start page
707
End page
718
Pages
12
Subject(s)
Division(s)
Eprints ID
216206