Price convergence on the national gas markets of the Eastern European region
-
DOIhttp://dx.doi.org/10.21511/ppm.20(4).2022.47
-
Article InfoVolume 20 2022, Issue #4, pp. 626-637
- 257 Views
-
35 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
Establishing institutional arrangements for regulating gas markets toward price convergence is one of the crucial integrational factors. The strategy of the firm and economic development management depends on it. The paper aims to assess the characteristics of price convergence on the natural gas markets of the Eastern European region. This region is relevant for Ukraine in a number of parameters. The assessment was made based on Eurostat data for different groups of consumers, excluding taxes, using the standard deviation detection method of price convergence for 15 countries in 2007–2020.
Despite the revealed generally positive price convergence on the natural gas markets in the considered countries after 2014, obtained results showed three points that highlight the heterogeneous structure of the process. First, an even movement toward a single price is detected in groups of large households (the standard price deviation of the price decreased in 2014–2020 from 2.7 to 1.9 euro per Giga Joule or 1.5 times) and medium industrial enterprises (the standard deviation decreased from 1.0-1.7 to 0.6-1.1 or 1.5-1.8 times). Second, the prices for the largest industrial enterprises in considered countries approached the fastest (the deviation decreased from 2.0 to 0.5). Third, in the segment of small enterprises, the deviation even increased from 2.1 to 2.2 (1.05 times). This result highlights the gap in the institutional mechanisms of European integration and sources of uncertainty for the small firms’ management.
Acknowledgment
The paper was funded as a part of the “Determination of institutional conditions for the development of the exchange segment of the gas market” research project (No. 0122U002205), conducted at the State Institution Institute for Economics and Forecasting of the NAS of Ukraine.
- Keywords
-
JEL Classification (Paper profile tab)F14, F15, F31, O24
-
References34
-
Tables1
-
Figures5
-
- Figure 1. Change in the tariff for natural gas by category of households, excluding taxation in the EER countries
- Figure 2. Change in the tariff for natural gas by category of households, including taxation in the EER countries
- Figure 3. Change in the tariff for natural gas by category of industrial enterprises, excluding taxation in the EER countries
- Figure 4. Change in the tariff for natural gas by category of industrial enterprises, including taxation in the EER countries
- Figure 5. Price convergence for households
-
- Table 1. Groups of natural gas consumers
-
- Asche, F., Osmundsen, P., & Tveterås, R. (2002). European market integration for gas? Volume flexibility and political risk. Energy Economics, 24(3), 249-265.
- Bastianin, A., Galeotti, M., & Polo, M. (2019). Convergence of European natural gas prices. Energy Economics, 81, 793-811.
- Boersma, T. (2015). Energy security and natural gas markets in Europe: Lessons from the EU and the United States (212 p.). London: Routledge.
- Brau, R., Doronzo, R., Fiorio, C., & Florio, M. (2010). EU gas industry reforms and consumers’ prices. The Energy Journal, 31(4).
- Broadstock, D., Li, R., & Wang, L. (2020). Integration reforms in the European natural gas market: A rolling-window spillover analysis. Energy Economics 92, 104939.
- Brown, S., & Yücel, M. (2008). Deliverability and regional pricing in US natural gas markets. Energy Economics, 30(5), 2441-2453.
- Cassetta, E., Nava, C., & Zoia, M. (2022). A three-step procedure to investigate the convergence of electricity and natural gas prices in the European Union. Energy Economics, 105, 105697.
- Chiappini, R., Jégourel, Y., & Raymond, P. (2019). Towards a worldwide integrated market? New evidence on the dynamics of US, European and Asian natural gas prices. Energy Economics, 81, 545-565.
- De Vany, A., & Walls, D. (1993). Pipeline access and market integration in the natural gas industry: Evidence from cointegration tests. Energy Journal, 14(4), 1-19.
- Doane, M., & Spulber, D. (1994). Open access and the revolution of the U.S. spot market for gas. Journal of Law and Economics, 37, 477-517.
- Engle, R., & Granger, C. (1987). Cointegration and error correction: Representation, estimation, and testing. Econometrica, 55(2), 251.
- Enke, S. (1951). Equilibrium among spatially separated markets: Solution by electric analogue. Econometrica: Journal of the Econometric Society, 19(1), 40-47.
- Funke, K., & Koske, I. (2008). Does the law of one price hold within the EU? A panel analysis. International Advances in Economic Research, 14, 11-24.
- Hailemariam, A., & Smyth, R. (2019). What drives volatility in natural gas prices? Energy Economics, 80, 731-742.
- Heather, P., & Petrovich, B. (2017). European traded gas hubs: an updated analysis on liquidity, maturity and barriers to market integration. Oxford Institute for Energy Studies.
- Jiroudková, A., Anna, L., Strielkowski, W., & Slosarcík, I. (2015). EU accession, transition and further integration for the countries of Central and Eastern Europe. Economics & Sociology, 8(2), 11-14.
- Li, R., Joyeux, R., & Ripple, R. D. (2014). International natural gas market integration. The Energy Journal, 35(4).
- Loureiro, J., Inchauspe, J., & Aguilera, R. (2022). World regional natural gas prices: Convergence, divergence or what? New evidence. The Energy Journal, 41(2), 29-46.
- Lutz, M. (2004). Price convergence under EMU? First estimates. In A. V. Deardorff (Ed.), The Past, Present and Future of the European Union (pp. 48-73). London: Palgrave Macmillan.
- Miriello, C., & Polo, M. (2015). The development of gas hubs in Europe. Energy Policy, 84, 177-190.
- Mu, X. (2007). Weather, storage, and natural gas price dynamics: Fundamentals and volatility. Energy Economics, 29(1), 46-63.
- Neumann, A. (2009). Linking natural gas markets – Is LNG doing its job? The Energy Journal, 30(Special Issue), 187-200.
- Neumann, A., & Siliverstovs, B. (2005). Convergence of European spot market prices for natural gas? A real-time analysis of market integration using the Kalman filter (Dresden Discussion Paper Series in Economics No. 05/05). Technische Universität Dresden.
- Núñez, H., Trujillo-Barrera, A., & Xiaoli, E. (2022). Declining integration in the US natural gas market. Resources Policy, 78, 102872.
- Renou-Maissant, P. (2012). Toward the integration of European natural gas markets: A time-varying approach. Energy Policy, 51, 779-790.
- Robinson, T. (2007). Have European gas prices converged? Energy Policy, 35(4), 2347-2351.
- Sebastian, N., & Tischler, B. (2014). The law of one price in global natural gas markets: A threshold cointegration analysis (EWI Working Paper No. 14/16). Institute of Energy Economics at the University of Cologne (EWI).
- Siliverstovs, B., L‘Hégaret, G., Neumann, A., & Von Hirschhausen, C. (2005). International market integration for natural gas? A cointegration analysis of prices in Europe, North America and Japan. Energy Economics, 27(4), 603-615.
- Stigler, G. J., & Sherwin, R. A. (1985). The extent of the market. The Journal of Law and Economics, 28(3), 555-585.
- Takayama, T., & Judge, G. G. (1964). Equilibrium among spatially separated markets: A reformulation. Econometrica: Journal of the Econometric Society, 510-524.
- Tsafos, N. (2020, May 15). When natural gas prices converge. Center for Strategic & International Studies.
- Wiggins, S., & Etienne, X. L. (2017). Turbulent times: Uncovering the origins of US natural gas price fluctuations since deregulation. Energy Economics, 64, 196-205.
- Zachmann, G. (2008). Electricity wholesale market prices in Europe: Convergence? Energy Economics, 30(4), 1659-1671.
- Zhang, D., & Broadstock, D. (2020). Global financial crisis and rising connectedness in the international commodity markets. International Review of Financial Analysis, 68, 101239.