Changes In Natural Gas Prices Research Articles

European equity markets volatility spillover: Destabilizing energy risk is the new normal

AbstractWhile energy risk is increasingly recognized as a systemic risk, there is limited comprehensive analysis of the risk propagation in regional contexts. In this study, we examine oil and natural gas price changes and shocks in relation to equity market returns and volatility for 24 European Economic Area (EEA) countries. In addition to traditional panel regressions, we also deploy the Diebold‐Yilmaz (2014) spillover index for a closed network analysis. We differentiate in the cross‐section across the core EU block, PIIGS countries, EU enlargement countries joining after 2004, and other non‐EU countries, to provide insights into the ongoing debates on the European energy market stability. While we find evidence of the manifestation of energy risk throughout the sample period, we find that until 2019 the primary sources of volatility spillover in the EEA economic network arose from economic or political uncertainty. Energy risks, measured by large crude oil and natural gas price shocks also significantly contributed to equity market volatility, with increasing volatility risk arising from natural gas, a green labelled energy source after 2019. Last, we show that CEEC equity markets are more sensitive to oil and natural gas price shocks when domestic currencies depreciate against the Euro.

The Cost of Using Gas as a Transition Fuel in the Transition to Low-Carbon Energy: The Case Study of Poland and Selected European Countries

The purpose of this article is to answer the question of whether it is economically justified to use natural gas as an interim fuel on the way to creating a low-emission energy sector from the perspective of Poland in comparison to other countries in the European Community. Despite the existence of numerous scientific studies concerning natural gas as a ‘bridge’ fuel, there is a lack of precise references to the situation of Poland in this respect, especially considering its specific situation in the historical development of energy, as well as the ongoing energy crisis caused by the Russia–Ukraine war. The study suggests that from Poland’s point of view, given the changes in natural gas prices resulting from a series of events of an international nature, gas investments are not economically justified in the economic climate (NPV of −891 million EUR) at present and will not be justified in the event of their anticipated changes (NPV of −691 million EUR), having its justification only in the presence of unlikely global changes (NPV of 2.37 billion EUR).

A Methodology to Support the Development of a New State Vision for the U.S. Nuclear Industry

Recent changes in natural gas prices combined with reduced capital costs for solar and wind systems has created challenges for the continued operation of existing nuclear power plants (NPPs) in the United States. A new strategy in the way in which U.S. NPPs are operated, maintained, and supported is needed. One such strategy is to transform the NPP operating model through a business-driven approach that leverages technology to enable new capabilities that improve performance and reduce costs. This paper presents a methodology for developing an achievable yet transformative new state vision that ensures the continued safe and efficient operations of the U.S. NPP fleet. This work builds on existing guidance and leverages previous research to comprehensively address both utility needs and high-level human factors engineering design principles when developing a new state vision. The proposed methodology is intended to provide industry-wide guidance for developing a new state vision that leverages both the selected vendor’s capabilities in a way that meets the utility’s modernization goals while ensuring state-of-the-art systems engineering and human factors engineering principles are applied that promote overall plant safety, performance, and efficiency.

How Strategic Behavior of Natural Gas Exporters Can Affect the Sectors of Electricity, Heating, and Emission Trading during the European Energy Transition

The European demand for natural gas imports may change through the energy transition, which may affect natural gas exporters’ strategic behavior and consequently the natural gas prices. Changes in natural gas prices in turn influence the European energy sector in terms of gas consumption in the short-term and investments in the long-term. The present paper develops a large-scale partial equilibrium market model formulated as a mixed complementarity model (MCP) with conjectural variations. This model considers the global natural gas market and the European markets of electricity, heating, and emission trading in one equilibrium. We apply this model to investigate the long-term impact of market power by gas exporters on the mentioned energy-related markets on the horizon of 2050. The results of the study show that a decrease in the market power by gas exporters decreases natural gas prices, leading to cheaper electricity and CO2 prices in the mid-term. However, a very tight emission cap in 2050 can result in the reverse phenomenon.

Electricity Market Restructuring and Retail Rates

State-regulated investor-owned utilities serve over 70 percent of electricity to final end-use retail consumers in the U.S. Prior to the 1990s, all states used a “cost of service (COS)” regulation regime in which investor-owned utilities were allowed to recover prudently incurred costs plus a rate of return on capital expenditures. From 1996-2000, some states passed electricity market “restructuring” that, over time, required utilities to separate the generation portion of their operations and allowed customers to purchase power from third party providers (commonly referred to as “retail choice”). This empirical research examines the effect of restructuring on electricity prices to final consumers. While these policies were generally advertised to reduce rates for final customers, in fact rates increased in restructured states relative to plausible counterfactual synthetic controls. We investigate plausible mechanisms for this finding; we find evidence that retail rates in restructured states are more responsive to natural gas price changes, the marginal fuel source during the period of analysis, and natural gas prices nationally increased in the post-restructuring era.

Key findings from the core North American scenarios in the EMF34 intermodel comparison

Within Canada, Mexico or the United States, policy-making organizations are evaluating energy markets and energy trade within their own borders often by ignoring how these countries’ energy systems are integrated with each other. These analytical gaps provided the main motivation for the Energy Modeling Forum (EMF) 34 study on North American energy integration and trade. This paper compares North American results from 17 models and discusses their policy motivation. Oil and natural gas production in the three major countries are modestly sensitive to crude oil and natural gas price changes, although these elasticities are below unity. Carbon taxes displace coal and some natural gas with renewables within all three power markets. Lower natural gas prices replace coal and some renewables with natural gas within electric generation. Higher intermittent renewable penetration in the power sector displaces coal and some natural gas. A key conclusion is that much remains to be done in integrating future analyses and in sharing and improving the quality and consistency of the underlying data.

THE CAUSALITY ANALYSIS OF THE EFFECT OF OIL AND NATURAL GAS PRICES ON UKRAINE STOCK INDEX

Since petroleum and natural gas are the main energy source, it is important for all countries in the world. Oil and natural gas reserves in the world are not evenly distributed; some countries are important oil and natural gas exporters while the others import these energy sources. For this reason, both exporting and importing countries have to pay close attention to oil and gas prices. For Ukraine, which imports more than 90% of its oil and natural gas needs, it makes the investigation of macroeconomic effects of the change in oil and natural gas prices extremely vital. There are many domestic and foreign studies investigating the interaction between oil and gas prices and both macro and micro economic variables in Ukraine. In this study, the effects of changes in oil and natural gas prices on the returns of the PFTS national index of the Ukrainian Stock Exchange were investigated. The study includes monthly data for January 2008 - September 2019 period. The Johansen cointegration test was conducted to determine whether the energy prices and PFTS index are cointegrated in the long run. According to the causality test, it was found that the change in oil price by 1 dollar and the change in natural gas price by 1 dollar cause the change in RFTS by 0.56 and by 0.31, respectively. Keywords : Ukraine, stock exchange, index, return, oil, natural gas, price. JEL Classifications: F30, F65, G12, G15 DOI: https://doi.org/10.32479/ijeep.9156

Northwestern European wholesale natural gas prices Comparison of several parametric and non-parametric forecasting methods

The ability to understand the stochastic process that governs the changes in natural gas prices is crucial for many reasons. This paper aims to introduce the important methods widely used in econometrics, by linking them to a common 'use case' in the subject of commodity pricing. Using the data of natural gas' weekly prices from 2007 to 2014 of the German gas hub, the methods of least squares, maximum likelihood, machine learning gradient descent, and least squares optimisation are used to compute the coefficients of a multivariate causal regression analysis. This study also tests the short-term prediction of wholesale natural gas prices for each method used. It is found that where the linear approximation is not valid, the method suffers accordingly. However, the mathematical methods of gradient descent and least squares optimisation help visualise the data sets, highlight, and accentuate the nonlinear effects of several variables on the spot gas prices.

Co-emission and welfare effects of electricity policy and market changes: Results from the EMF 32 model intercomparison project

From the simulation results of the Energy Modeling Forum's recently completed project on US greenhouse gas emission mitigation policies, this paper estimates and examines welfare effects of carbon dioxide (CO2) pricing policies, fuel and technology cost changes, higher electricity demand growth, and limited nuclear generator lifetimes. Eight of the models in the study reported outputs sufficient to estimate damage from CO2, sulfur dioxide (SO2), nitrogen oxides (NOX), and methane, and three of those eight reported outputs sufficient to calculate consumer surplus, supplier profit, government revenue, and therefore total social surplus. Over approximately thirty years, the four CO2 tax policies reduce emissions enough to reduce estimated CO2 damage by $1 to $1.5 trillion, SO2 damage by $1 to $1.3 trillion, and NOX and methane damage by smaller amounts, based on averaging the results from the relevant models. The estimated non-environmental social surplus cost of each of these policies is between 23% and 29% of its environmental benefit. The CO2 cap-and-trade scenario, modeled after the Clean Power Plan, reduces estimated CO2 damage and other emission damage each by $0.4 trillion, at a non-environmental social surplus cost estimated to be 17% of the environmental benefit. Changing the natural gas price changes SO2 damage more than twice as much as it changes CO2 damage. Estimated methane emissions move in the same direction as CO2 emissions in every scenario other than the low natural gas price scenario, in which the methane increase counteracts an estimated 27% of the benefit from the CO2 reduction but only 5% of the total net benefit. In addition, the paper explains the set of assumptions and methods used to estimate environmental damage, and briefly explains how the non-environmental parts of total social surplus can sometimes be computed from more common results if necessary.

Well service rigs, operating rigs, and commodity prices

ABSTRACTThis study examines the degree to which the deployment of well service rigs is responsive to changes in commodity prices and operating rigs in terms of long- and short-run estimates of elasticity. Well service rigs respond more to changes in natural gas rigs than oil rigs, and more to real oil prices than to real natural gas prices. In the shorter term, the findings document that the responses of well service rigs to changes in natural gas rigs and real oil prices are highly elastic, with no significant responses to changes in natural gas prices. The error correction model reveals that the change in well service rig usage adjusts to eliminate disequilibrium in the long-run relationship that exists between rigs and commodity prices. This research shows the important role that well service rigs play in the decisions of exploration and production (E&P) companies as they respond to changes in commodity prices.

Natural gas price effects in China based on the CGE model

Natural gas is a clean energy source with many benefits and its proportion in the energy consumption structure in China has been gradually increasing over the recent years. Since the price of natural gas in China has been controlled and maintained at a relatively low level by the government, reforming the natural gas industry in China has been the matter of much attention in light of its macroeconomic effects on the overall economy. Using the Computable General Equilibrium model and the 2012 Social Accounting Matrix, the results show increases in natural gas prices lead to an increase in the consumer price index (CPI) and lead to reductions in GDP. The chemical industry sector is strongly influenced by a natural gas price increase. Furthermore, chemical fertilizer manufacturing industry and chemical products’ manufacturing have very significant effects in China. Therefore the government may gradually establish and improve the management of natural gas price to avoid negative effects, and implement a differential price as the industries exhibit different levels of resistance in response to natural gas price changes.

Natural gas stakeholders during price growth: a case of Ukraine

Purpose – The purpose of this paper is to establish groups of stakeholders who win and lose from changes in natural gas prices and to develop practical recommendations for a state regulator for the optimal setting natural gas prices in the domestic market through an example of Ukraine. Design/methodology/approach – In this study, to identify groups of stakeholders with gains and losses from the pricing of natural gas, the author used traditional methods of correlation and statistical regression analysis, including the ordinary least squares (OLS) method. Findings – The main profit from natural gas remains in the extraction sector. The remaining profit is distributed among the various stakeholders. The consumers during rapidly rising gas prices have to rely on energy efficiency and switching to alternative, less costly resources. The existing system of unified natural gas price for all industrial consumers is inefficient and leads to the losses of the largest industrial sectors in Ukraine – metallurgy and chemical industry. With the help of the developed models, the author determined the critical levels of natural gas prices for these two industries. Research limitations/implications – The study is limited by data about activity of eight key manufacturing companies, four gas distribution companies, and main state gas companies from two country only. Practical implications – Defined levels can be used by a state regulatory authority as a boundary, above which these industries will be unprofitable and their fate along with hundred thousands of workers will be questionable. Originality/value – This is the first paper that set the critical levels of natural gas prices for two manufacturing industries in Ukraine.

State Dependence in the Natural Gas and Rig Count Relationship

The goal of this analysis is to understand the relationship between natural gas prices and the North American natural gas rig count. Prior research has generally not included changes in the rig count as a determinant of contemporaneous or future changes in natural gas prices. We first show that when not allowing state dependence, then the rig count does not affect natural gas prices. We then show, when allowing state dependence in the natural gas and rig count relationship, changes in the rig count are an important determinant of future changes in gas prices when natural gas prices are high. That is, over our monthly sample from 1997 through 2013, we find that the rig count has a negative and significant relationship with future natural gas price changes (Granger-causes) when natural gas prices are above a $6.74/MMBtu threshold. However, when gas prices are below this threshold, then the rig count does not affect natural gas prices (though gas prices do affect the rig count). Moreover, we find evidence consistent with media reports that natural gas producers tend to 'kill any rally' in gas prices by markedly increasing gas production.

Natural Gas Economy in the United States and European Markets

From 2001-2012, international trade in natural gas increased by 86.4%, with LNG technology visibly growing in importance. In 2005, the share of LNG in the total turnover accounted for 26%, while in 2012 for 32%. In 2012, global natural gas consumption, compared to the previous year, increased by 2%, reaching 3.3 bcm. North America recorded a significant increase of 27.5% in the consumption of gas, whereas in EU countries the consumption of this fuel decreased by 2.3%. This paper examines how the share of natural gas in primary energy consumption has changed in the European and American markets; the role of this energy source has been strengthening in the US market (28.3% in 2011; 30.0% in 2012) while showing a slight decline in Europe (24.2% in 2011; 23.9% in 2012). The analysis also presents the changes that occurred in terms of dependency on gas imports in the US market, with natural gas imports decreasing due to the development of unconventional gas deposits. In comparison, in the European market lower gas recovery from domestic reserves has meant increased importance of gas imports, including LNG. The paper presents changes in natural gas prices in the European and American markets, along with the prices of LNG delivered to Japan. In addition, it reviews trends in natural gas prices for industrial consumers and households in Canada and the United States (where the ‘shale revolution’ has significantly affected a drop in prices), as well as in selected EU countries. Finally, the impact in recent years of the global natural gas market on the gas sector in Poland is examined. Highlighted are the actions undertaken to establish a competitive gas market.

Implications of changing natural gas prices in the United States electricity sector for SO2, NOX and life cycle GHG emissions

Projections of increased domestic natural gas supply and low prices have encouraged increased natural gas utilization in the United States electricity sector. Natural gas can offset coal, likely decreasing overall greenhouse gas (GHG) emissions and other air emissions such as SO2 and NOX. Previous life cycle assessment (LCA) studies using limited system boundaries have attempted to quantify the benefit of offsetting coal use. However, these studies do not consider that relative regional fuel prices may contribute most to the choice of coal over natural gas. External incentives such as low natural gas prices compared to coal are required if natural gas is to displace coal. In this study, simplified economic dispatch models are used to determine how natural gas utilization will increase in the short-term in response to changes in natural gas prices in three US grid regions—ERCOT, MISO and PJM. The results indicate that the change in air emissions is lower than suggested by LCAs, since LCAs generally do not include the complexity of regional electricity grids. For instance, this study estimates that life cycle GHG emissions may, at best, decrease by 7–15% due to low natural gas prices, compared to almost 50% reductions estimated by previous LCAs.