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Natural Gas markets are far from being global
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Friday, 11/26/2021
For years, energy professionals have predicted that gas markets will behave, in the image of the crude oil market, as a single and global market. However, this is not yet a reality.
Luís Aguiar-Conraria, EEG's professor of the Department of Economics and researcher at the Centre for Research in Economics and Management (NIPE), published, together with Gilmar Conceição, PhD scholar in Economics at EEG, and Maria Joana Soares, a researcher at NIPE, a study that analyses the integration of the North American, European and Asian natural gas markets and their relationship with the oil markets.
Taking the oil market as a reference and using the wavelets analysis to study the synchronization of the various markets, the authors concluded that not much progress had been made yet, with markets still being remarkably regional. On the one hand, the Japanese and European natural gas markets are synchronized, but this synchronization is smaller than in the global oil market and has decreased over the last decade. On the other hand, the North American market is much more independent.
The authors prove that the apparent synchronisation between regional gas markets can be explained by the global oil market, which, despite being an imperfect substitute for gas, interconnects the various markets. In other words, it is the oil prices that set the rhythms. The authors equally conclude that, once this unifying mechanism of oil is discounted, the regional gas markets are relatively independent of each other, responding to local shocks in supply and demand.
The article is available at
https://doi.org/10.5547/01956574.43.4.lagu
Gabinete de Comunicação
Escola de Economia e Gestão
Universidade do Minho
Telefone: 253 604541
e-mail:
gci@eeg.uminho.pt
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