How alternative energy competition shocks natural gas development in China: A novel time series analysis approach

Abstract

As a significant pollutant emitter, China has used natural gas as a bridge to transition from fossil energy to renewable energy. However, as alternative energy sources for natural gas, oil and coal have hindered natural gas development. This paper proposed a novel method for examining the impact of alternation energy competition on natural gas consumption (NGC) based on wavelet spectrum transform and the Structural Vector autoregression model. Multi-time domain Granger causality test, cross-wavelet transform, and coherent wavelet transform are introduced to analyze the complicated and controversial relationship between oil prices, coal prices, natural gas prices, and NGC. First, the comprehensive transaction price index, namely LNG price, thermal coal price, coking coal price, gasoline price, diesel price, and fuel oil price, were used as the influence variables. Second, the raw data is processed by wavelet decomposition, and non-stationary series is decomposed into several detailed sequences and approximate sequences with different frequencies to extract data features. The results reveal that; (1) the high-scale correlation fluctuation exists between LNG price, thermal coal price, diesel price, coking coal price, and NGC in the different time domain, (2) the analysis results of diesel prices, thermal coal prices, and fuel oil prices indicate that the influences of energy competition on NGC are beyond doubt, (3) in short-term, coal prices have a more significant impact on natural gas prices than oil prices in China (4) the NGC is more susceptible to fluctuations of thermal coal price and diesel price. Overall, our findings provide noteworthy suggestions for the policymakers in making natural gas planning.