Price Adjustments and Transaction Costs in the European Natural Gas Market

Garaffa, Rafael; Szklo, Alexandre; Lucena, André F.P.; Féres, José Gustavo

doi:10.5547/01956574.40.1.rgar

Cited by 15 publications

(4 citation statements)

References 33 publications

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“…Using a trade based instrument to induce a price spike thus would have induced (too) large price spikes in countries with a too high exposure to Russian gas. Furthermore, a European market exists for natural gas, such that at least the marginal spot market price is faced relatively uniformly across member states (Garaffa et al 2019). Thus, modelling endogenous price responses based on quantity restrictions may lead to different price increases between member states and inducing spurious competitiveness effects.…”

Section: Discussionmentioning

confidence: 99%

The effects of higher gas prices on the EU economy: a computable general equilibrium modelling perspective

Weitzel,

Vandyck,

Garaffa

et al. 2024

Environ. Res.: Energy

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Russia’s invasion of Ukraine has led to strong economic repercussions globally. In particular, turbulences on international energy markets and reduced flows of natural gas from Russia to the EU led to a sharp increase of natural gas prices. In this paper, we investigate the effect of higher gas prices on the European economy using the computable general equilibrium model JRC-GEM-E3. Numerical simulations quantify direct and indirect (via spillovers to electricity prices) implications for macro-economic outcomes, sectoral trade and employment, and distributional impacts across household income deciles. Results indicate that the (indirect) macro-economic impacts from electricity price changes induced by higher gas prices are larger than the (direct) impact of the gas price increase. Spatial heterogeneity in gas price impacts across regions globally leads to trade and competitiveness impacts, but has little influence on aggregate GDP impacts. The energy price shock is regressive, and results indicate strong employment impacts in particular sectors. Finally, the scenarios indicate that the macro-economic impact of the same energy price shock would be reduced by more than two thirds, if it were to occur in an economy that has decarbonised to achieve the EU’s 2030 climate targets. This illustrates that decarbonising the economy enhances the resilience to fossil fuel price increases.

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Section: Discussionmentioning

confidence: 99%

The effects of higher gas prices on the EU economy: a computable general equilibrium modelling perspective

Weitzel,

Vandyck,

Garaffa

et al. 2024

Environ. Res.: Energy

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“…Therefore, it is not surprising that prices are the result of local supply and demand in the North American markets, where gas competes with other gas (gas-on-gas pricing). In the other regions of the world, it is common to have gas prices directly linked to oil prices (Garaffa et al, 2019). To be more precise, in Europe, gas prices are a function of energy substitutes, which naturally include oil products.…”

Section: Discussionmentioning

confidence: 99%

“…Overall, there is ample evidence that gas markets are regionally very integrated. We can, therefore, treat them as a single market; e.g., Renou-Maissant (2012), Asche et al (2013), Yorucu and Bahramian (2015), Bastianin et al (2019), andGaraffa et al (2019), regarding European markets, and Park et al (2008) and Avalos et al (2016), for North American markets. Nevertheless, they are not globally integrated.…”

Section: Introductionmentioning

confidence: 99%

How Far is Gas from becoming a Global Commodity?

Aguiar‐Conraria¹,

Conceição²,

Soares³

2022

The Energy Journal

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While we can say that there is a global market for crude oil, we cannot say the same cannot for natural gas. There is a strand of literature that argues that, in the last decades, gas markets have become less regional and more global. We use wavelets to test this hypothesis and conclude otherwise: although the European and Japanese gas markets are signi…cantly synchronized, they are much less than the oil markets, which we take as the benchmark. We also show that the North American gas market ‡uctuations are independent of the other gas markets. Finally, we show that the existing synchronization between gas markets almost vanishes once one …lters out the e¤ect of oil price variations, suggesting that it is the global oil market that connects the regional gas markets.

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“…The coefficient b in Eq. 2 would denote price elasticity in the logarithmic form, which is not consonant with the cost-of-carry model (Garaffa et al, 2019).…”

Section: Price Discoverymentioning

confidence: 99%

Re-examining the efficiency of the EU carbon futures market in phase Ⅱ: price discovery and intertemporal arbitrage

Xi,

Pan,

Qin

2023

Front. Energy Res.

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Introduction: Carbon futures market plays an important role in energy conservation and emission reduction of energy-intensive firms, and its efficiency is largely reflected by the dynamic relationship between carbon spot and futures prices. Even though the EU carbon futures market has undergone three phases, its efficiency in Phase Ⅱ still contains much controversy.Methods: Based on the cost-of-carry model, we apply linear and nonlinear Granger causality test, vector error correction model and threshold vector error correction model to re-examine the efficiency of the carbon futures market in the second phase of the European Union Emissions Trading System from the perspectives of price discovery and intertemporal arbitrage.Results: i) the EU carbon futures market has the function of price discovery by virtue of the broad scope of participants and the consequent huge liquidity, suggesting that the carbon futures price can predict the carbon spot price; ii) the coefficient requirement of the cost-of-carry model is satisfied and the relationship between the European Union Allowance (EUA) futures and spot prices is consistent with the cost-of-carry model, which indicates that the former is an unbiased estimator of the latter and an equilibrium relationship exists between the two prices so that the carbon futures market is efficient in the long run; iii) however, the carbon futures market shows inefficiency in the short run since it has an error correction function only when the basis is less than −0.07 and the carbon futures price indicates a remarkably slow adjustment to the long-run equilibrium when there is deviation, which can be ascribed to the global financial crisis as well as its aftermath in 2008.Discussion: In the context of global warming and carbon neutrality, the results of this paper are of great significance to emitters, arbitrageurs, hedgers and policymakers in emerging and young carbon markets.

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Price Adjustments and Transaction Costs in the European Natural Gas Market

Cited by 15 publications

References 33 publications

The effects of higher gas prices on the EU economy: a computable general equilibrium modelling perspective

The effects of higher gas prices on the EU economy: a computable general equilibrium modelling perspective

How Far is Gas from becoming a Global Commodity?

Re-examining the efficiency of the EU carbon futures market in phase Ⅱ: price discovery and intertemporal arbitrage

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