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Markets in Real Electric Networks Require Reactive Prices

William W. Hogan

Year: 1993
Volume: Volume14
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol14-No3-8
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Abstract:
Differences in locational spot prices in an electric network provide the natural measure of the price for transmission. The ubiquitous problem of loop flow requires different economic intuition for interpreting the implications of spot pricing. The DC-Load model is the usual approximation for estimating spot prices, although it ignores reactive power effects. This approximation is best when thermal constraints create congestion in the network. In the presence of voltage constraints, the DC-Load model is insufficient, and the full AC-Model is required to determine both real and reactive power spot prices.



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.



Oil Industry Structure and Evolving Markets

Joe Roeber

Year: 1994
Volume: Volume 15
Number: Special Issue
DOI: 10.5547/ISSN0195-6574-EJ-Vol15-NoSI-14
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Abstract:
Of all the changes in the oil industry over the past 20 years, the most radical have taken place in the market, and in the formation of prices. These are both a response to and a cause of changes in industry structure. From plannable supplies at relatively stable prices, companies have had to learn to handle short term supplies in condition of extreme volatility. Management of the resulting price risk has become a central role of the companies' supply departments, and the use of paper markets (forward, futures and derivatives) has become an integral part of price formation. It is not impossible that the changes would be reversed, if the conditions that brought them into being-surplus production and de-integrated supply structures-were reversed in conditions of scarcity, but it is highly unlikely. Far more likely, is that risk management and the use of paper markets will increase in importance.



Business Cycles and the Behavior of Energy Prices

Apostolos Serletis and Vaughn Hullernan

Year: 1994
Volume: Volume15
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol15-No2-7
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Abstract:
This paper tests the theory of storage-the hypothesis that the marginal convenience yield on inventory falls at a decreasing rate as inventory increases in energy markets (crude oil, heating oil, and unleaded gas markets). We use the Fama and French (1988) indirect test, based on the relative variation in spot and futures prices. The results suggest that the theory holds for the energy markets.



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.



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
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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.



Estimating the Volatility of Wholesale Electricity Spot Prices in the US

Lester Hadsell, Achla Marathe and Hany A. Shawky

Year: 2004
Volume: Volume 25
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol25-No4-2
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Abstract:
This paper examines the volatility of wholesale electricity prices for five US markets. Using data covering the period from May 1996 to September 2001, for the California-Oregon Border, Palo Verde, Cinergy, Entergy, and Pennsylvania-New Jersey-Maryland markets, we examine the volatility of electricity wholesale prices over time and across markets. We estimate volatility using a TARCH model to study the differences among markets and the seasonal characteristics of each market. For all markets, we find strong evidence for a downward trend in the ARCH term and a significant negative asymmetric effect over the sample period. We also document important differences among the regional electricity markets not only with respect to wholesale price volatility and seasonal variations, but also with respect to asymmetric properties and persistence of volatility.



Examining Asymmetric Behavior in US Petroleum Futures and Spot Prices

Bradley T. Ewing, Shawkat M. Hammoudeh and Mark A. Thompson

Year: 2006
Volume: Volume 27
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol27-No3-2
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Abstract:
This paper uses the momentum-threshold autoregressive (M-TAR) model to examine the possible asymmetric relationship between petroleum futures and spot prices for three different markets: crude oil, heating oil, and gasoline in the United States. The results indicate that the futures and spot prices for each petroleum type are cointegrated when allowing for asymmetric adjustment for each of these energy markets. We further investigate the asymmetric behavior between the futures and spot prices by estimating the M-TAR error-correction model. The M-TAR model allows us to document the adjustments that these markets undergo in response to changes in the basis.



The Supply of Storage for Natural Gas in California

Rocío Uría and Jeffrey Williams

Year: 2007
Volume: Volume 28
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol28-No3-3
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Abstract:
Do natural gas storage decisions in distant California respond to NYMEX futures price spreads? Daily data about flows into and out of storage facilities in California over 2002-2006 and daily spreads on NYMEX are used to investigate whether the net injection profile is consistent with the supply-of-storage curve first observed by Working for wheat. Storage decisions in California do seem to be influenced by a price signal that combines the intertemporal spread and the locational basis between California and the Henry Hub, in addition to strong seasonal and weekly cycles that determine net injections to a considerable extent. The timing and magnitude of the price response differ across storage facilities. Regulatory requirements and operational constraints also limit the response to short-lived arbitrage opportunities.



Randomly Modulated Periodic Signals in Australias National Electricity Market

John Foster, Melvin J. Hinich and Phillip Wild

Year: 2008
Volume: Volume 29
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol29-No3-6
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Abstract:
In this article, we use half hourly spot electricity prices and load data for the National Electricity Market (NEM) of Australia for the period from December 1998 to August 2007 to test for randomly modulated periodicity. In doing so, we apply signal coherence spectral analysis to the time series of half hourly spot prices and megawatt-hours (MWh) load demand from 7/12/1998 to 31/08/2007 using the FORTRAN 95 program developed by Hinich (2000). We detect relatively steady weekly and daily cycles in load demand but relatively more unstable cycles in prices.




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