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How does the U.S. natural gas market react to demand and supply shocks in the crude oil market?

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  • Jadidzadeh, Ali
  • Serletis, Apostolos

Abstract

In this paper we use monthly data (over the period from January 1976 to December 2012) and a structural VAR model to disentangle demand and supply shocks in the global crude oil market and investigate their effects on the real price of natural gas in the United States. We identify the model by assuming that innovations to the real price of crude oil are predetermined with respect to the natural gas market and show that close to 45% of the variation in the real price of natural gas can be attributed to structural supply and demand shocks in the global crude oil market.

Suggested Citation

  • Jadidzadeh, Ali & Serletis, Apostolos, 2017. "How does the U.S. natural gas market react to demand and supply shocks in the crude oil market?," Energy Economics, Elsevier, vol. 63(C), pages 66-74.
    • Handle: RePEc:eee:eneeco:v:63:y:2017:i:c:p:66-74
    DOI: 10.1016/j.eneco.2017.01.007
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    More about this item

    Keywords

    Oil price; Oil price shocks; Structural VAR;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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