IDEAS home Printed from https://ideas.repec.org/a/gam/jeners/v13y2020i17p4479-d406736.html
   My bibliography  Save this article

Impact of US Shale Gas on the Vertical and Horizontal Dynamics of Ethylene Price

Author

Listed:
  • Soohyeon Kim

    (Overseas Energy Information Analysis Team, Korea Energy Economics Institute, Ulsan 44543, Korea)

  • Surim Oh

    (Department of Energy Systems Engineering, College of Engineering, Seoul National University, Seoul 08826, Korea)

Abstract

The rise of shale resources in the United States is changing the petrochemical industries. Ethylene, the first building block of petrochemical products, is becoming the first target to be hit by the shale boom, and its shifting price dynamics needs to be explored. This study analyzes the transition of ethylene prices from crude oil to natural gas (vertical price dynamics) and investigates widening gaps among regional ethylene prices (horizontal price dynamics). To do this, we detect structural changes in cointegrating relationships and derive time-varying cointegration equations. In addition, for the long- and short-run dynamics, this study established and estimated an error correction model (ECM), with controlling, time-varying cointegrations. This study develops econometric studies by applying time-varying cointegration to nonenergy uses of fossil fuels. Thereby, our results discover that the feedstock structure of US ethylene is moving from crude oil to natural gas and that the comovement of US and Japanese prices is getting intensified.

Suggested Citation

  • Soohyeon Kim & Surim Oh, 2020. "Impact of US Shale Gas on the Vertical and Horizontal Dynamics of Ethylene Price," Energies, MDPI, vol. 13(17), pages 1-12, August.
    • Handle: RePEc:gam:jeners:v:13:y:2020:i:17:p:4479-:d:406736
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1996-1073/13/17/4479/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1996-1073/13/17/4479/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22.
    2. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    3. Durbin, James & Koopman, Siem Jan, 2012. "Time Series Analysis by State Space Methods," OUP Catalogue, Oxford University Press, edition 2, number 9780199641178.
    4. Brigida, Matthew, 2014. "The switching relationship between natural gas and crude oil prices," Energy Economics, Elsevier, vol. 43(C), pages 48-55.
    5. Atle Oglend & Morten E. Lindback & Petter Osmundsen, 2016. "Shale Gas Boom Affecting the Relationship Between LPG and Oil Prices," The Energy Journal, , vol. 37(1), pages 211-232, January.
    6. Park, Sung Y. & Zhao, Guochang, 2010. "An estimation of U.S. gasoline demand: A smooth time-varying cointegration approach," Energy Economics, Elsevier, vol. 32(1), pages 110-120, January.
    7. Mariya Titov & Ydriss Ziane, 2014. "Price dynamics of propylene and ethylene in the United States," Post-Print halshs-02023315, HAL.
    8. Gillian Foster, 2018. "Ethylene Supply in a Fluid Context: Implications of Shale Gas and Climate Change," Energies, MDPI, vol. 11(11), pages 1-17, November.
    9. Masih, Mansur & Algahtani, Ibrahim & De Mello, Lurion, 2010. "Price dynamics of crude oil and the regional ethylene markets," Energy Economics, Elsevier, vol. 32(6), pages 1435-1444, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Subin Jung & Hyojin Jung & Yuchan Ahn, 2022. "Optimal Economic–Environmental Design of Heat Exchanger Network in Naphtha Cracking Center Considering Fuel Type and CO 2 Emissions," Energies, MDPI, vol. 15(24), pages 1-14, December.
    2. Pierre Failler, 2021. "Special Issue on Global Market for Crude Oil," Energies, MDPI, vol. 14(4), pages 1-2, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Frank Asche, Atle Oglend, and Petter Osmundsen, 2017. "Modeling UK Natural Gas Prices when Gas Prices Periodically Decouple from the Oil Price," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    2. Feng, Gen-Fu & Wang, Quan-Jing & Chu, Yin & Wen, Jun & Chang, Chun-Ping, 2021. "Does the shale gas boom change the natural gas price-production relationship? Evidence from the U.S. market," Energy Economics, Elsevier, vol. 93(C).
    3. Martin T. Bohl & Alexander Pütz & Pierre L. Siklos & Christoph Sulewski, 2018. "Information Transmission under Increasing Political Tension – Evidence for the Berlin Produce Exchange 1887-1896," CQE Working Papers 7618, Center for Quantitative Economics (CQE), University of Muenster.
    4. Kevin S. Nell & Maria M. De Mello, 2019. "The interdependence between the saving rate and technology across regimes: evidence from South Africa," Empirical Economics, Springer, vol. 56(1), pages 269-300, January.
    5. Christou, Christina & Gupta, Rangan & Nyakabawo, Wendy & Wohar, Mark E., 2018. "Do house prices hedge inflation in the US? A quantile cointegration approach," International Review of Economics & Finance, Elsevier, vol. 54(C), pages 15-26.
    6. Chiappini, Raphaël & Jégourel, Yves & Raymond, Paul, 2019. "Towards a worldwide integrated market? New evidence on the dynamics of U.S., European and Asian natural gas prices," Energy Economics, Elsevier, vol. 81(C), pages 545-565.
    7. Philipp Adämmer & Martin T. Bohl, 2018. "Price discovery dynamics in European agricultural markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 38(5), pages 549-562, May.
    8. Fukuda, Takashi & Dahalan, Jauhari, 2011. "“Finance-Growth-Crisis Nexus in India: Evidence from Cointegration and Causality Assessment” - L’interazione finanza-crescita-crisi in India: evidenze da una analisi di cointegrazione e causalità," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 64(3), pages 297-328.
    9. Grassi, Stefano & Santucci de Magistris, Paolo, 2014. "When long memory meets the Kalman filter: A comparative study," Computational Statistics & Data Analysis, Elsevier, vol. 76(C), pages 301-319.
    10. Niels Haldrup & Carsten P. T. Rosenskjold, 2019. "A Parametric Factor Model of the Term Structure of Mortality," Econometrics, MDPI, vol. 7(1), pages 1-22, March.
    11. Joscha Beckmann & Ansgar Belke & Michael Kühl, 2009. "How Stable Are Monetary Models of the Dollar-Euro Exchange Rate?: A Time-Varying Coefficient Approach," Discussion Papers of DIW Berlin 944, DIW Berlin, German Institute for Economic Research.
    12. Shanker, Latha, 2017. "New indices of adequate and excess speculation and their relationship with volatility in the crude oil futures market," Journal of Commodity Markets, Elsevier, vol. 5(C), pages 18-35.
    13. Tino Berger, 2011. "Estimating Europe’s natural rates," Empirical Economics, Springer, vol. 40(2), pages 521-536, April.
    14. Bekiros, Stelios & Marcellino, Massimiliano, 2013. "The multiscale causal dynamics of foreign exchange markets," Journal of International Money and Finance, Elsevier, vol. 33(C), pages 282-305.
    15. Patrice Guillotreau & Frédéric Lantz & Lesya Nadzon & Jonathan Rault & Olivier Maury, 2023. "Price Transmission between Energy and Fish Markets: Are Oil Rates Good Predictors of Tuna Prices?," Marine Resource Economics, University of Chicago Press, vol. 38(1), pages 29-46.
    16. Gatfaoui, Hayette, 2019. "Diversifying portfolios of U.S. stocks with crude oil and natural gas: A regime-dependent optimization with several risk measures," Energy Economics, Elsevier, vol. 80(C), pages 132-152.
    17. Kuan-Min Wang & Yuan-Ming Lee, 2023. "Are life insurance futures a safe haven during COVID-19?," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-27, December.
    18. Fukuda, Takashi & Dahalan, Jauhari, 2011. "Finance-Growth-Crisis Nexus in India: Evidence from Cointegration and Causality Assessment," MPRA Paper 39467, University Library of Munich, Germany.
    19. Alain Galli, 2017. "How Reliable are Cointegration-Based Estimates for Wealth Effects on Consumption? Evidence from Switzerland," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 153(4), pages 437-479, October.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jeners:v:13:y:2020:i:17:p:4479-:d:406736. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.