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The role of underground storage in the dynamics of the US natural gas market: A threshold model analysis

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  • Rubaszek, Michał
  • Uddin, Gazi Salah

Abstract

Natural gas is an important source of energy in the global economy, hence understanding the drivers of its prices is of significant interest for the many economic agents. This paper investigates the role of inventories for the dynamics of the U.S. natural gas market. Our contribution is twofold. First, within the threshold structural VAR framework we demonstrate that in a low inventory regime spot prices are more responsive to economic fundamentals in comparison to situation in which the inventories are high. Second, we present evidence that the level of natural gas inventories have a significant effect on the relationship between spot and futures prices.

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  • Rubaszek, Michał & Uddin, Gazi Salah, 2020. "The role of underground storage in the dynamics of the US natural gas market: A threshold model analysis," Energy Economics, Elsevier, vol. 87(C).
    • Handle: RePEc:eee:eneeco:v:87:y:2020:i:c:s0140988320300529
    DOI: 10.1016/j.eneco.2020.104713
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    Cited by:

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    2. Farhangdoost, Sara & Etienne, Xiaoli L., 2020. "Time-Varying Storage Announcement Effect in Natural Gas Market," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304476, Agricultural and Applied Economics Association.
    3. Long, Shaobo & Guo, Jiaqi, 2022. "Infectious disease equity market volatility, geopolitical risk, speculation, and commodity returns: Comparative analysis of five epidemic outbreaks," Research in International Business and Finance, Elsevier, vol. 62(C).
    4. Yanting Chen & Peter R. Hartley & Yihui Lan, 2023. "Temperature, storage, and natural gas futures prices," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 43(4), pages 549-575, April.
    5. Christos Floros & Georgios Galyfianakis, 2020. "Bubbles in Crude Oil and Commodity Energy Index: New Evidence," Energies, MDPI, vol. 13(24), pages 1-11, December.
    6. Jinniao Qiu & Antony Ware & Yang Yang, 2024. "Stochastic Path-Dependent Volatility Models for Price-Storage Dynamics in Natural Gas Markets and Discrete-Time Swing Option Pricing," Papers 2406.16400, arXiv.org.
    7. Szafranek Karol & Rubaszek Michał, 2024. "Have European natural gas prices decoupled from crude oil prices? Evidence from TVP-VAR analysis," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 28(3), pages 507-530.
    8. Hardy, Nicolás & Ferreira, Tiago & Quinteros, Maria J. & Magner, Nicolás S., 2023. "“Watch your tone!”: Forecasting mining industry commodity prices with financial report tone," Resources Policy, Elsevier, vol. 86(PA).
    9. Rubaszek, Michał & Szafranek, Karol & Uddin, Gazi Salah, 2021. "The dynamics and elasticities on the U.S. natural gas market. A Bayesian Structural VAR analysis," Energy Economics, Elsevier, vol. 103(C).
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    11. Adolfsen, Jakob Feveile & Ferrari Minesso, Massimo & Mork, Jente Esther & Van Robays, Ine, 2024. "Gas price shocks and euro area inflation," Working Paper Series 2905, European Central Bank.

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    More about this item

    Keywords

    Natural gas market; Structural VAR; Threshold models; Futures market;
    All these keywords.

    JEL classification:

    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • 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
    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices

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