On the Determinants of Trade in Natural Gas: A Political Economy Approach

Markos Farag () and Chahir Zaki
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Markos Farag: Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI), https://www.ewi.uni-koeln.de/en/

No 2021-8, EWI Working Papers from Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)

Abstract: This paper aims to analyze the determinants of trade in natural gas through a political economy lens. Indeed, in addition to the economic determinants of trading in natural gas, the latter could be affected by political determinants such as the economic sanctions and the institutional gap between the trading partners. Moreover, while the literature considers the effect of tariffs, less attention has been attributed to non-tariff measures (NTMs) that might also be imposed for political reasons. To quantify the impact of these different determinants on natural gas trade, we use a gravity model that explains bilateral trade for pipeline natural gas (PNG) and liquefied natural gas (LNG) over the period 2000-2017. We also consider the zero trade flows of natural gas by using the Poisson Pseudo Maximum Likelihood estimator. Our results show that economic sanctions have reduced bilateral LNG trade by 24%, on average. We also find that the institutional gap between trading partners exerts a significant negative effect on bilateral PNG and LNG trade, pointing out that institutions could be considered as fixed export costs in the natural gas market. Moreover, our results indicate that, in addition to tariffs, non-tariff measures have a significant negative effect on trade in natural gas.

Keywords: Natural gas; gravity model; institutions; economic sanctions (search for similar items in EconPapers)
JEL-codes: C55 F14 Q34 Q35 Q43 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2021-11-29
New Economics Papers: this item is included in nep-ene and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:ewikln:2021_008

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