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(Showing results 1 to 9 of 9)



I. Conceptual Framework - The Gordian Knot of Natural Gas Prices

Henry D. Jacoby and Arthur W. Wright

Year: 1982
Volume: Volume 3
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol3-No4-1
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Abstract:
Federal policy toward natural gas prices is once again the subject of national debate. Thought to be settled once and for all by the Natural Gas Policy Act of 1978 (NGPA), it reemerged as an issue in 1981. The proximate causes of the renewed controversy included candidate Ronald Reagan's campaign promise to seek wellhead price decontrol, and the Reagan administration's attempts (until March 1982) to find a workable decontrol proposal. But the wellsprings of the problem go deeper than this, to the history of gas price regulation, to changes in energy markets since 1978, and to serious defects in the NGPA itself.



The Value of Commodity Purchase Contracts With Limited Price Risk

Elizabeth Olmsted Teisberg and Thomas J. Teisberg

Year: 1991
Volume: Volume 12
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol12-No3-8
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Abstract:
This paper describes and demonstrates the equilibrium market valuation of commodity purchase contracts with price ceilings or price floors or both. These contracts, which we call "limited price risk" contracts, are significantly easier for buyers and sellers to agree upon than fixed price contracts when price uncertainty is high and buyers and sellers have inconsistent price expectations. Analysis of an actual natural gas contract as well as the existence of many brokers promoting limited price risk gas contracts, suggest that these contracts may be priced inefficiently in practice. Our example application should help managers to make use of modem financial techniques in assessing the value of these types of contracts.



A Quantitative Analysis of Pricing Behavior in California's Wholesale Electricity Market During Summer 2000

Paul L. Joskow and Edward Kohn

Year: 2002
Volume: Volume23
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol23-No4-1
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Abstract:
During the Summer of 2000, wholesale electricity prices in California were nearly 500% higher than they were during the same months in 1998 or 1999. This price explosion was unexpected and has called into question whether electricity restructuring will bring the benefits of competition promised to consumers. The purpose of this paper is to examine the factors that explain this increase in wholesale electricity prices. We simulate competitive benchmark prices for Summer of 2000 taking account of all relevant supply and demand factors-gas prices, demand, imports from other states, and emission permit prices. We then compare the simulated competitive benchmark prices with the actual prices observed. We find that there is a large gap between our benchmark competitive prices and observed prices, suggesting that the prices observed during Summer 2000 reflect, in part, the exercise of market power by suppliers. We then proceed to examine supplier behavior during high price hours. We find evidence that suppliers withheld supply from the market that would have been profitable for price-taking firms to sell at the market price.



The LNG Revolution

James T. Jensen

Year: 2003
Volume: Volume24
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol24-No2-1
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Abstract:
This paper discusses the influence that the world wide liberalization of the natural gas industry is likely to have on the future development of liquefied natural gas (LNG). The paper examines some of the barriers to the workably competitive commodity model for this complex cross-border trade and speculates about the likely future structure of the industry.



Natural Gas Pricing in Countries of the Middle East and North Africa

Hossein Razavi

Year: 2009
Volume: Volume 30
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol30-No3-1
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Abstract:
This paper presents a quantitative framework for discussing the gas pricing policy in the countries of Middle East and North Africa (MENA) where gas prices are set directly or indirectly by the governments. It concludes that the price of gas in most MENA countries is substantially below its economic cost, resulting in wasteful use of gas and electricity, deployment of inefficient technologies, and huge burden on government budgets. The low gas price also causes a bias in favor of gas export projects while at the same time reduces investors� interest in the upstream and downstream gas sector. The implications are most interesting about four countries � Algeria, Qatar, Egypt and Iran � where each country has to revisit its gas allocation policy and where each government is trying to de-link investors� interest from domestic gas prices.



The Weak Tie Between Natural Gas and Oil Prices

David J. Ramberg and John E. Parsons

Year: 2012
Volume: Volume 33
Number: Number 2
DOI: 10.5547/01956574.33.2.2
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Abstract:
Several recent studies establish that crude oil and natural gas prices are cointegrated. Yet at times in the past, and very powerfully in the last two years, many voices have noted that the two price series appear to have “decoupled”. We explore the apparent contradiction between these two views. We find that recognition of the statistical fact of cointegration needs to be tempered with two additional points. First, there is an enormous amount of unexplained volatility in natural gas prices at short horizons. Hence, any simple formulaic relationship between the prices will leave a large portion of the natural gas price unexplained. Second, the cointegrating relationship does not appear to be stable through time. The prices may be tied, but the relationship can shift dramatically over time. Therefore, although the two price series may be cointegrated, the confidence intervals for both short and long time horizons are large. Keywords: Oil price, Natural gas price, Cointegration



International Natural Gas market Integration

Raymond Li, Roselyne Joyeux, and Ronald D. Ripple

Year: 2014
Volume: Volume 35
Number: Number 4
DOI: 10.5547/01956574.35.4.7
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Abstract:
We explore the relationships among the North American, European and Asian natural gas markets for evidence of convergence and integration for the January 1997 through May 2011 period. The analyses are conducted under a multivariate framework, so the dynamics among the prices can be captured without the necessity of identifying an anchor price series. We find evidence of convergence among the Japanese, Korean, Taiwanese and UK prices. The North American price displays behaviour that is distinct from this group of prices. We conclude that there is not a fully integrated international natural gas market. The integration between European (represented by NBP) and Asian geographic regions appears to be due primarily to underlying contractual mechanisms specifically linking natural gas prices to oil prices rather than the result of market supply and demand interactions. We also find that the relationship among the Asian markets has evolved with Japanese prices adjusting to changes in South Korean and Taiwanese prices.



Natural Gas Combined Cycle Utilization: An Empirical Analysis of the Impact of Environmental Policies and Prices

Kelly A. Stevens

Year: 2018
Volume: Volume 39
Number: Number 5
DOI: 10.5547/01956574.39.5.kste
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Abstract:
Recent climate regulations include increased utilization of natural gas-fired combined cycle (NGCC) generators as a means for offsetting coal generation to reduce carbon emissions. There have been substantial increases in utilization for some generators, but most remain below baseload levels. This paper examines the factors that have driven NGCC utilization from 2003-2014. I run difference-in-difference models to evaluate the relationships between environmental policies and natural gas prices on NGCC utilization. Both low natural gas prices and the Clean Air Interstate Rule (CAIR) drive increases in utilization. However, the size of the impact by CAIR depends on the age of the plant. I use the estimates from this model for a counterfactual analysis which reveals CAIR had nearly twice the impact of low natural gas prices on increased utilization in nationwide averages.Keywords: Natural Gas, Utilization, Environmental Policy, Natural Gas Prices



Price Adjustments and Transaction Costs in the European Natural Gas Market

Rafael Garaffa, Alexandre Szklo, André F. P. Lucena, and José Gustavo Féres

Year: 2019
Volume: Volume 40
Number: Number 1
DOI: 10.5547/01956574.40.1.rgar
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Abstract:
The presence of long-term contracts indexed to oil prices is a key feature of the evolution of the European natural gas industry. During the 2000's, the European Commission (EC) promoted reforms to establish a single and integrated natural gas market, leading to the development of short-term regional markets based on hubs. This paper tests the hypothesis that asymmetric price responses in the continental European hubs derive from transaction costs. By applying linear and nonlinear error correction models, it assesses the price transmission dynamics and the degree of integration between the German, the Belgium and the Dutch spot markets. The models identified cointegration relations, price asymmetries and transaction costs in these markets. Results show a high degree of integration across regions, with prices converging rapidly to their long-run equilibrium. However, asymmetric price adjustments reveal the presence of transaction costs in the German regional hub.





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