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The increase in liquefied natural gas trade has accelerated the integration of previously segmented markets in North America, Europe, and Asia. This paper provides evidence on the integration of the transatlantic natural gas market; it thus complements other papers in the EMF 23 study that focus on prices and international natural gas trade. We test the theoretical proposition that in integrating markets commodity prices should move closer than before. Using 2,059 pairs of daily spot prices for natural gas in North America and Europe we investigate price dynamics covering the period from 1999 until 2008. We apply the Kalman Filter technique which measures convergence by allowing for dynamic structural change to gain detailed information on trends inherent in prices over time. Results suggest an increasing convergence of spot prices on either side of the Atlantic Basin. [ABSTRACT FROM AUTHOR]

This paper presents results of simulating a more collusive behavior of a group of natural gas producing and exporting countries, sometimes called GASPEC. We use the World Gas Model, a dynamic, strategic representation of world gas production, trade, and consumption between 2005 and 2030. In particular, we simulate a closer cooperation of the GASPEC countries when exporting pipeline gas and liquefied natural gas; we also run a more drastic scenario where GASPEC countries deliberately hold back production. The results show that compared to our Base Case, a gas cartel would reduce total supplied quantities and induce price increases in gas importing countries up to 22%. There is evidence that the natural gas markets in Europe and North America would be affected more than other parts of the world. Lastly, the vulnerability of gas importers worldwide is further illustrated by the results of a sensitivity case in which price levels are up to 87% higher in Europe and North America. [ABSTRACT FROM AUTHOR]

This paper explores the links between oil prices and inflation in the euro area by means of a DSGE model reflecting the structure of the energy markets in the euro area and calibrated to match the data using reduced-form time series techniques. The analysis focuses on the impact on inflation (through the Harmonised Index of Consumer Prices (HICP) and its energy component) in the short and medium run. The main conclusion is that, in the short term, changes in oil prices are of vital importance for the understanding of inflation, but that at longer horizons their impact on inflation is much more complex and depends on the initial shock. An analysis of the sources of oil price increases remains therefore a pre-requisite for a proper understanding of historical fluctuations of oil prices and the related developments in the euro area, and for drawing policy conclusions. [ABSTRACT FROM AUTHOR]

This paper analyzes the residential natural gas demand in 12 European countries using a dynamic demand model, which allows for country-specific short- and long-run elasticity estimates. The own-price and income elasticities tend to be very inelastic in the short run, albeit with much greater responsiveness in the longer run. Our results support very limited technological substitution possibilities between different energy carriers in the short run. Furthermore, the results suggested structural differences of residential natural gas demand across European countries and provide support for employing a heterogeneous estimator such as the shrinkage estimator. [ABSTRACT FROM AUTHOR]

The paper presents panel unit root tests for price convergence of different petroleum products over the last decade. We distinguish consumer and producer price convergence and test for the absolute versus relative version of the law of one price. Comparing the speed of convergence as well as its development over time indicates that price arbitrage in the common EU markets is not sufficiently strong to level the price differentials, mainly caused by different excise taxation. We show that taxation alone leads to market segmentation and that discretionary national tax policy by EU member states is not (yet) threatened by the observable level of cross-border shopping. [ABSTRACT FROM AUTHOR]

The electricity liberalization is contested by many European consumers" who hold it responsible for the electricity price increase, but such a conclusion is questionable. As the various spot markets are connected, liberalization will imply a convergence of electricity prices for all European countries if any congestion is observed on the networks. We observe today that German gas power stations are often "marginal power stations"; thus the German spot market is often the price maker. High price for oil means high price for natural gas and indirectly" high price for electricity. Moreover increasing interconnection of electricity markets leads to surplus transfers among European consumers and producers of electricity. But for some people the price increase observed today results also partly from a rise in the market power of electricity producers. This paper examines the position of the main European incumbents in this field. [ABSTRACT FROM AUTHOR]