LNG is linking regional natural gas markets: Evidence from the gravity model

Ryan Barnes and Ryan Bosworth

Energy Economics, 2015, vol. 47, issue C, 11-17

Abstract: Evidence exists that global natural gas markets have become more integrated over time. One possible explanation for this increased level of integration is that increased liquefied natural gas trade has increased the opportunity for price arbitrage by decreasing transport costs. If this explanation is true, then the natural gas market should become relatively more integrated because countries separated by large distances would be more willing to trade with each other. We employ a gravity model to test whether trade in liquefied natural gas has helped to de-regionalize the total natural gas market, using trade in the compressed natural gas market as a comparison benchmark. The results indicate that liquefied natural gas is indeed a global commodity, whereas the compressed natural gas markets are more regional. Importantly, we find that trade in liquefied natural gas has de-regionalized the total natural gas market.

Keywords: LNG; Natural gas; Transportation costs (search for similar items in EconPapers)
JEL-codes: F15 Q37 Q40 Q41 Q56 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (37)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:47:y:2015:i:c:p:11-17

DOI: 10.1016/j.eneco.2014.10.004

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