The Energy Crises and Contagion from Europe to World: Evidence via Stochastic Volatility Model

Abstract

The new period, which started with the increase in energy prices in Europe, turned into a crisis in a short time and had a serious negative impact on the locomotive economies of the continent. Russia's attempts to reduce the amount of supply, despite the increasing energy demand of the European economies in the recovery effort, appear as the trigger of the crisis process. In this direction, a process has emerged in which we have witnessed the increasing tensions between major European economies and Russia, especially since the second half of 2021. On the other hand, the large increases in energy prices in a short time created the effect of gasoline spilled on the fire in the increase of tensions between the parties. Therefore, the effect of the 2021 energy crisis on the global scale has become inevitable. In the light of all these, first, it was discussed the effect of the European energy crisis on the price changes in the world's leading markets . In this context, important natural gas market data of Europe was evaluated with American and Asian spot and benchmark prices. In the light of the data obtained, the existence or nature of the correlation were analyzed between the price movements in these three important natural gas markets systematically. TTF and Henry Hub are the two important markets to be covered in the analysis. In the light of all these, in the study, it was analyzed whether the process that emerged in Europe, has affected other market prices via the Stochastic Volatility Model. It was found that TTF, Henry Hub and JKM companies, which supply gas to the European market, increased their share returns between 01.12.2017 and 01.12.2021 (crisis periods).