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Pipeline Access and Market Integration in the Natural Gas Industry: Evidence from Cointegration Tests

Arthur De Vany and W. David Walls

Year: 1993
Volume: Volume14
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol14-No4-1
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Abstract:
This research seeks to determine the extent to which the Federal EnergyRegulatory Commission's policy of "Open Access" to natural gas pipelines has created competition in natural gas markets. We argue that recently developed cointegration techniques are the natural way to evaluate competition between natural gas spot markets at dispersed points in the national transmission network. We test daily spot prices between 190 market-pairs located in 20 producing fields and pipeline interconnections and find that the price series are not stationary and that most field markets were not cointegrated during 1982 By 1991, more than 65% of the markets had become cointegrated. The increased cointegration of prices is evidence that open access has made gas markets more competitive.



Price Convergence Across Natural Gas Fields and City Markets

W. David Walls

Year: 1994
Volume: Volume15
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol15-No4-3
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Abstract:
This research reports the results of cointegration tests between natural gas spot prices at various production fields, pipeline hubs, and city markets. Cointegration between prices is evidence that spatial arbitrage is enforcing tile law of one price across market locations. The results show that prices at certain city markets, Chicago and to a lesser went California, are cointegrated with prices at field markets. However, the prices at most other locations do not move in step with gas prices in the field markets. Customer access to pipeline transportation, or competitive bypass, may explain why prices at some city markets are more responsive to production field prices than others.



An Econometric Analysis of the Market for Natural Gas Futures

W. David Walls

Year: 1995
Volume: Volume16
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol16-No1-5
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Abstract:
This research tests a form of the efficient markets hypothesis in the, market for natural gas futures. Unlike other studies of futures markets, the test for market efficiency is conducted at numerous locations which comprise the, natural gas spot market in addition to the delivery location specified in the futures contract. Natural gas spot and futures prices are found to be nonstationary and accordingly are modeled using recently developed maximum likelihood cointegration techniques. The futures market price is found to be cointegrated with nearly all of the spot market prices across the national network of gas pipelines. The hypothesis of market efficiency can be rejected in 3 of the 13 spot markets examined.



Lifting the Alaskan Oil Export Ban: An Intervention Analysis

Charles W. Bausell Jr., Frank W. Rusco and W. David Walls

Year: 2001
Volume: Volume22
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol22-No4-4
No Abstract



Price Effects of Boutique Motor Fuels: Federal Environmental Standards, Regional Fuel Choices, and Local Gasoline Prices

W. David Walls and Frank W. Rusco

Year: 2007
Volume: Volume 28
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol28-No3-8
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Abstract:
Federal clean air regulations have spawned a proliferation of motor fuel types that have created differentiated markets for motor fuels, increased the cost of supplying these fuels, and reduced the capacity of the supply infrastructure. In this paper we examine wholesale gasoline prices in 99 US cities over a time horizon of 204 weeks using a panel data regression model to explain fuel prices as a function of fuel attributes, the price of crude oil, and seasonal and city-market-specific effects. Our results show that fuel prices are related to the use of a special blend not widely available in the region and more costly to make, and the situation of the particular city market in relation to major refining centers or other sources of supply.





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