Do natural hazards in the Gulf Coast still matter for state-level natural gas prices in the US? Evidence after the shale gas boom

Kuan-Ming Huang and Xiaoli Etienne

Energy Economics, 2021, vol. 98, issue C

Abstract: Historically, natural gas prices in the United States are closely linked to supply disruptions in the Gulf Coast due to the dominance of offshore and Gulf states production. Over the past decade, the combined share of natural gas production from the states in shale-rich areas has increased dramatically, while Gulf region production has become less important. One reasonable assumption is then that the supply disruptions due to weather events in the Gulf Coast exert a much smaller effect on natural gas prices compared to the pre-shale era. This paper uses panel distributed lag models to empirically test this hypothesis using state-level natural gas prices from 1995 to 2016. Property losses due to natural hazards in Texas and Louisiana are used to represent supply shocks in the natural gas market from the Gulf area. Results show that natural gas prices in both importing and exporting states have become less responsive to natural hazards in Texas but more sensitive to hazard events in Louisiana since the shale boom. These results are robust to the break dates used, the geographical location of states considered, and the empirical specifications employed. The increasing importance of Louisiana in natural gas pricing is perhaps due to its role as the benchmark pricing location for US natural gas and its expansive pipeline networks.

Keywords: Fixed-effects panel distributed lag model; Natural gas; Natural hazards; Price fluctuations; Property damage; Supply disruptions (search for similar items in EconPapers)
JEL-codes: Q33 Q41 Q54 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:98:y:2021:i:c:s0140988321001729

DOI: 10.1016/j.eneco.2021.105267

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