Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/286377 
Year of Publication: 
2023
Series/Report no.: 
EWI Working Paper No. 23/03
Publisher: 
Institute of Energy Economics at the University of Cologne (EWI), Cologne
Abstract: 
This paper analyzes the integration of the American, European, and Asian natural gas markets over the period 2016-2022, with a focus on how the demand shock caused by the COVID-19 pandemic and the supply shock caused by geopolitical tensions in the European market affected this integration. We also examine which regional market is leading in reflecting new information and shocks into the market price. Our analysis indicates that the market integration process has been impacted by external shocks, leading to a decrease in the degree of integration between the European and Asian markets. Additionally, we find that the American market is no longer integrated with the other two markets after the supply shock, potentially due to the US's congested and fully utilized LNG infrastructure. Our analysis also shows that the gas price differentials adjust asymmetrically in response to disturbances, suggesting that markets respond differently to positive and negative shocks. Moreover, we show that the lead/lag relationship changes over time and exhibits a dynamic behavior. Finally, we discuss the fundamental changes in the global gas market that align with our empirical results.
Subjects: 
Natural gas markets
Market integration
Threshold Co-integration
Time-varying causality
JEL: 
C32
D40
D58
F21
F41
G13
G14
L95
Q35
Q41
Document Type: 
Working Paper

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