Persistence of Oil Prices in Gas Import Prices and the Resilience of the Oil-Indexation Mechanism. The Case of Spanish Gas Import Prices

Pablo Cansado-Bravo and Carlos Rodríguez-Monroy
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Pablo Cansado-Bravo: Escuela Técnica Superior de Ingenieros Industriales de Madrid, Universidad Politécnica de Madrid, 28006 Madrid, Spain
Carlos Rodríguez-Monroy: Escuela Técnica Superior de Ingenieros Industriales de Madrid, Universidad Politécnica de Madrid, 28006 Madrid, Spain

Energies, 2018, vol. 11, issue 12, 1-17

Abstract: Regardless of the rapid development of national gas centers around the world, oil price indexation remains the prevailing pricing process in Continental Europe and the Far East. The instance of Spain is a genuine case where gas supply conditions may, to some extent, clarify the slower pace of execution of a traded gas hub in the nation. This article seeks to explain the persistence of oil-indexed pricing mechanisms, a price model that differs oddly from that of other major commodities, the price of which is normally discovered on the market. In order to do that, we examine time-varying volatility to find that since 2013 until 2016, just about 33% of gradual volatility clustering rooted within oil Brent prices is reflected in Spanish gas prices. In this sense, our research provides quantitative tools to better understand that market-based approaches such as spot and medium-term supply alternatives seem to be a key driver for success in transforming gas markets. Regular updates on the size of the effects observed should facilitate an exact appraisal of the level of progression of national gas liberalization processes and enhance gas markets transparency, these issues of extraordinary importance for both policymakers and gas market agents.

Keywords: long-term gas price; oil price; energy policy; volatility clustering; autocorrelation; volatility modeling (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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