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Turbulent times: Uncovering the origins of US natural gas price fluctuations since deregulation

Seth Wiggins and Xiaoli Etienne ()

Energy Economics, 2017, vol. 64, issue C, 196-205

Abstract: In this paper, we investigate supply and demand shocks in the U.S. natural gas market, focusing on how the effects of these shocks have changed over time. Using a sign-identified structural vector autoregression (SVAR) model that allows for both time-varying parameters and stochastic volatility, we find that supply and demand shocks are the main drivers of natural gas price fluctuations during 1993–2015, with speculative activities playing a minor role during a portion of the sample period. We also find that after the recent shale boom, the supply and demand of natural gas in the US have become somewhat more elastic. An examination of several volatile episodes during the sample period suggest that though natural gas price fluctuations are predominately determined by fundamental factors, supply and demand shocks have significantly evolved over time.

Keywords: Natural gas; Time-varying; Stochastic volatility; Supply disruptions; Demand shocks; Inventory; Price movements; Structural vector autoregressions (search for similar items in EconPapers)
JEL-codes: E31 E37 Q41 Q43 (search for similar items in EconPapers)
Date: 2017
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Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

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