Europe in World Natural Gas Market: International Transmission of European Price Shocks

Authors

  • Ivan Aleksandrovich Kopytin Head of Center for Energy Research, Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences, Profsoyuznaya Str.23, Moscow, 117997, Russian Federation.
  • Alexander Oskarovich Maslennikov Senior Research Fellow, Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences, Profsoyuznaya Str.23, Moscow, 117997, Russian Federation.
  • Stanislav Vyacheslavovich Zhukov Deputy Director for Science, Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences, Profsoyuznaya Str.23, Moscow, 117997, Russian Federation

DOI:

https://doi.org/10.32479/ijeep.12941

Abstract

The paper applies the Vector Error Correction Model (VECM) framework with 250 days rolling window to the analysis of the interconnectedness of regional markets for natural gas in Europe, the Asia-Pacific region and the US. Transmission of European gas market fundamentals to other regional gas markets is assessed by using carbon price in the EU Emissions Trading System and European gas storage capacity utilization. The latter is proven to be a significant component in the cointegrating equation that links natural gas prices in Europe and the Asia-Pacific region. It is shown that gas prices in all three regional markets are pairwise cointegrated while cointegration between gas and oil prices is absent in Europe and the Asia-Pacific region and weak in the US. It is also concluded that fundamental factors of the European gas market influence gas price dynamics not only in Europe, but also in the Asia-Pacific region and, to a lesser extent, the US. In sum, the increasing importance of LNG import in European natural gas consumption has given a strong impetus to the formation of the global natural gas market.

Keywords:

Gas Price, Oil Price, Carbon Price, Transmission of Price Shocks, LNG, Gas Storage Capacity Utilization, EU, Asia-Pacific Region, US

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Published

2022-05-18

How to Cite

Kopytin, I. A., Maslennikov, A. O., & Zhukov, S. V. (2022). Europe in World Natural Gas Market: International Transmission of European Price Shocks. International Journal of Energy Economics and Policy, 12(3), 8–15. https://doi.org/10.32479/ijeep.12941

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Articles