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Oil Price Shocks and the U.S. Economy: Where Does the Asymmetry Originate?

Nathan S. Balke, Stephen P.A. Brown and Mine K. Yucel

Year: 2002
Volume: Volume23
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol23-No3-2
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Abstract:
Rising oil prices appear to retard aggregate U.S. economic activity by more than falling oil prices stimulate it. Past research suggests adjustment costs, financial stress, and/or monetary policy may be possible explanations for the asymmetric response. This paper uses a near vector autoregressive model of the U.S. economy to examine where the asymmetry might originate. The analysis uses counterfactual experiments to determine that monetary policy alone cannot account for the asymmetry.



What Drives Natural Gas Prices?

Stephen P. A. Brown and Mine K. Yucel

Year: 2008
Volume: Volume 29
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol29-No2-3
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Abstract:
For many years, fuel switching between natural gas and residual fuel oil kept natural gas prices closely aligned with those for crude oil. More recently, however, the number of U.S. facilities able to switch between natural gas and residual fuel oil has declined, and over the past seven years, U.S. natural gas prices have been on an upward trend with crude oil prices but with considerable independent movement. Natural gas market analysts generally emphasize weather and inventories as drivers of natural gas prices. Using an error-correction model, we show that when these and other additional factors are taken into account, movements in crude oil prices have a prominent role in shaping natural gas prices. Our findings imply a continuum of prices at which natural gas and petroleum products are substitutes.



Market Arbitrage: European and North American Natural Gas Prices

Stephen P. A. Brown and Mine K. Yucel

Year: 2009
Volume: Volume 30
Number: Special Issue
DOI: 10.5547/ISSN0195-6574-EJ-Vol30-NoSI-11
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Abstract:
The development of an international market for liquefied natural gas (LNG) and the resulting opportunities for intercontinental arbitrage are seen as creating a world in which movements in natural gas prices are linked between continents. Increased flows of LNG into the United States and the potential sensitivity of these shipments to price differentials between Europe and North America suggests the possibility of a strengthening relationship between natural gas prices on these two continents. At the same time, there is considerable evidence linking natural gas price movements in Europe and North America to those for crude oil. Accordingly, we use a series of econometric tests to determine whether the co-movement between natural gas prices in Europe and North America is mediated through crude oil prices or is being shaped directly by gas-to-gas arbitrage.





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