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Theory of Storage: An Empirical Assessment of the European Natural Gas Market

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  • Marcus Stronzik
  • Margarethe Rammerstorfer
  • Anne Neumann

Abstract

We analyze the relation between European natural gas storage facilities and price patterns at major trading points, considering the theory of storage to derive a testable hypothesis imposed by the non-arbitrage condition. To model the efficiency of the natural gas market, we apply two indirect tests absent the scarcity of European inventory data. We find that operators of storage facilities realize seasonal arbitrage profits, and that market performance overall is substantially distinct from the competitive benchmark.

Suggested Citation

  • Marcus Stronzik & Margarethe Rammerstorfer & Anne Neumann, 2008. "Theory of Storage: An Empirical Assessment of the European Natural Gas Market," Discussion Papers of DIW Berlin 821, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp821
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    File URL: https://www.diw.de/documents/publikationen/73/diw_01.c.89005.de/dp821.pdf
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    References listed on IDEAS

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    Cited by:

    1. Stronzik, Marcus & Rammerstorfer, Margarethe & Neumann, Anne, 2009. "Does the European natural gas market pass the competitive benchmark of the theory of storage? Indirect tests for three major trading points," Energy Policy, Elsevier, vol. 37(12), pages 5432-5439, December.

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    More about this item

    Keywords

    Storage; energy commodity; natural gas; convenience yield;
    All these keywords.

    JEL classification:

    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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