Estimating the long-run equilibrium relationship: The case of city-gate and residential natural gas prices

Kathleen Arano and Marieta Velikova

Energy Economics, 2010, vol. 32, issue 4, 901-907

Abstract: This paper examines market cointegration of city-gate and residential natural gas prices. Cointegration of gas prices across different segments of the industry provides evidence that deregulation has resulted into a more integrated, competitive natural gas industry where gas prices converge into a long-run equilibrium. Our results indicate prices further down the distribution line, the final two points of consumption, are cointegrated for a majority of the US states post open access and retail unbundling, although we find little evidence of perfect market integration. The two price series likewise converge to the long-run equilibrium faster post open access and retail unbundling. Results relative to state level unbundling (choice programs) reveal mixed outcomes with a few states without retail unbundling exhibiting market integration while some states with full unbundling exhibiting non-cointegration.

Keywords: Natural; gas; Regulation; Cointegration (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:32:y:2010:i:4:p:901-907

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