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A North American Gas Trade Model (GTM)

Mark A. Beltramo, Alan S. Manne, and John P. Weyant

Year: 1986
Volume: Volume 7
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol7-No3-2
View Abstract

Abstract:
Natural gas ranks second only to crude oil as a primary source of energy in North America, During recent years, gas has satisfied 25 percent of all energy requirements in the United States. Most of this gas has been produced domestically, but 5 to 10 percent has been supplied by pipeline imports from Canada and Mexico. Additional amounts could be provided by pipelines from Alaska or by LNG (liquefied natural gas) imports from overseas, but these facilities would be expensive, and their construction continues to be delayed. Transport costs are high, and geography plays a far more important role in international gas markets than in the oil markets. For this reason, we view the North American continent as a largely self-contained system.



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

Apostolos Serletis

Year: 1997
Volume: Volume18
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol18-No1-2
View Abstract

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.



Price Convergence in Natural Gas Markets: City-Gate and Residential Prices

Kathleen Arano and Marieta Velikova

Year: 2009
Volume: Volume 30
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol30-No3-7
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Abstract:
It has been argued that the restructuring of the natural gas industry have lead to a successful deregulation. Evidence from previous studies has shown that the unbundling of gas services and the requirement of open access have made prices from various segments in the industry more cointegrated. Our results indicate that even the smallest volume natural gas customers�residential consumers have felt the benefits of the industry restructuring. 90 percent of the 50 state level city gate and residential natural gas pairs that we examined showed evidence of cointegration. Further investigation reveals that the price series for more states were cointegrated in the post 1992 period after FERC 636 (the �final restructuring rule�) was implemented and when retail unbundling started.



The Future of Electricity (and Gas) Regulation in a Low-carbon Policy World

Michael G. Pollitt

Year: 2008
Volume: Volume 29
Number: Special Issue #2
DOI: 10.5547/ISSN0195-6574-EJ-Vol29-NoSI2-5
View Abstract

Abstract:
This paper discusses whether a new paradigm is necessary for independent economic regulation of electricity (and closely associated natural gas) systems. We begin by summarizing the nature of the traditional model of electricity reform and the place of economic regulation within it. Next we outline the drivers for changing the current model of electricity regulation, namely, the maturity of the existing model, the reality of changing circumstances, and the coming of age of climate change concern. We go on to discuss the premises on which a new model of regulation should be based. These are: remembering the successes of the current system of regulation; a new focus on processes not just outcomes; a recognition of the economics of climate change; and the appropriate management of uncertainty. We then highlight the key elements of a new model for regulation: new processes of regulation; new models of competition and the issues raised by a focus on climate change. The paper draws heavily on the experience of the UK, but has direct implications for the rest of the European Union countries and for other countries whose regulatory systems mirror them.



The Informational Efficiency of European Natural Gas Hubs: Price Formation and Intertemporal Arbitrage

Sebastian Nick

Year: 2016
Volume: Volume 37
Number: Number 2
DOI: 10.5547/01956574.37.2.snic
View Abstract

Abstract:
In this study, the informational efficiency of the European natural gas market is analyzed by empirically investigating price formation and arbitrage efficiency between spot and futures markets. Econometric approaches accounting for nonlinearities induced by the low liquidity-framework and by technical constraints of the considered gas hubs are specified. The empirical results reveal that price discovery generally takes place on the futures market. Thus, the futures market seems to be more informationally efficient than the spot market. The theory of storage seems to hold at all hubs in the long run. There is empirical evidence of significant market frictions hampering intertemporal arbitrage. UK's NBP and Austria's CEGH seem to be the hubs at which arbitrage opportunities are exhausted most efficiently, although there is convergence in the degree of intertemporal arbitrage efficiency over time at the hubs investigated.



The Short and Long Term Impact of Europe’s Natural Gas Market on Electricity Markets until 2050

Jan Abrell and Hannes Weigt

Year: 2016
Volume: Volume 37
Number: Sustainable Infrastructure Development and Cross-Border Coordination
DOI: https://doi.org/10.5547/01956574.37.SI3.jabr
View Abstract

Abstract:
The interdependence of electricity and natural gas is becoming a major energy policy and regulatory issue in all jurisdictions around the world. The increased role of gas fired plants in renewable-based electricity markets and the dependence on natural gas imports make this issue particular important for the European energy market. In this paper we provide a comprehensive combined analysis of electricity and natural gas infrastructure with an applied focus: We analyze three different scenarios of the long-term European decarbonization pathways, and analyze the interrelation between electricity and natural gas markets on investments in the long run and spatial aspects in the short run.



A Top-Down Approach to Evaluating Cross-Border Natural Gas Infrastructure Projects in Europe

András Kiss, Adrienn Selei, and Borbála Takácsné Tóth

Year: 2016
Volume: Volume 37
Number: Sustainable Infrastructure Development and Cross-Border Coordination
DOI: https://doi.org/10.5547/01956574.37.SI3.akis
View Abstract

Abstract:
There is an ongoing policy debate in Europe about how to select natural gas infrastructure projects for an EU-wide investment support scheme. We contribute to this debate by introducing a model-based project evaluation method that addresses several shortcomings of the current approach and demonstrate its application on a set of shortlisted investment proposals in Central and South Eastern Europe. Importantly, our selection mechanism deals with the complementarity and the substitutability of new pipelines. We find that a small number of projects are sufficient to maximize the net gain in regional welfare, but different baseline assumptions favor different project combinations. We also explore the consequences of Russian gas permanently delivered at the EU border from northern and southern routes that bypass Ukraine and find modest negative welfare effects.



Measuring and Assessing the Evolution of Liquidity in Forward Natural Gas Markets: The Case of the UK National Balancing Point

Lilian M. de Menezes, Marianna Russo, and Giovanni Urga

Year: 2019
Volume: Volume 40
Number: Number 1
DOI: 10.5547/01956574.40.1.lmen
View Abstract

Abstract:
Following the development of natural gas trading hubs in Europe, forward products have become a response to the higher exposure to price risk faced by energy companies. Yet, a significant share of trade occurs over-the-counter (OTC), where inter-dealer brokers act as intermediaries and deals may be customized. Hence, there are concerns about transparency and market quality, of which liquidity is a main indicator. This study investigates liquidity in the largest one-month-ahead European forward market for natural gas in the period from May 2010 to December 2014, using asynchronous high-frequency data and time-varying measures of spread and price impact from the financial market microstructure literature. The usefulness of these measures in the seasonal and evolving National Balancing Point (NBP) is assessed. Different aspects of liquidity and transaction costs are unveiled.



A Practitioner's Perspective on Modeling Prices and Trade in a Globalizing Natural Gas Market

Robert D. Stibolt

Year: 2009
Volume: Volume 30
Number: Special Issue
DOI: 10.5547/ISSN0195-6574-EJ-Vol30-NoSI-2
View Abstract

Abstract:
This paper advances some principles for practical application of natural gas models that were used during the EMF 23 study. These principles emphasize a decision-focused perspective, embrace uncertainty, demand consistency of model results with observable facts, are capable of navigating the complexity of systems, and distinguish insight from unattainable precision. The principles are designed to foster the assistance of better decision making by models and modelers.



Globalisation of Natural Gas Markets - Effects on Prices and Trade Patterns

Finn Roar Aune, Knut Einar Rosendahl and Eirik Lund Sagen

Year: 2009
Volume: Volume 30
Number: Special Issue
DOI: 10.5547/ISSN0195-6574-EJ-Vol30-NoSI-4
View Abstract

Abstract:
The regional natural gas markets are expected to gradually become more integrated. The major driving forces are lower LNG costs, more spot trade, and increased need for imports into the US and other key markets. In this paper we examine various scenarios for a future global gas market, particularly focusing on natural gas prices and trade patterns. We use a numerical model of the international energy markets, with detailed modelling of regional gas production and international gas transport. Scenarios with different assumptions about future demand and supply conditions are simulated. Our results suggest that trade between continents will grow considerably over the next couple of decades, and that prices in the main import regions will remain around current levels. However, significant constraints on exports from the Middle East may alter this picture.




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