The dynamics of the U.S. and Canada natural gas spot markets are evolving through
deregulation policies and technological advances. Economic theory suggests that these
markets will be integrated. The key question is the extent of integration among the
markets. This thesis characterizes the degree of dynamic integration among 11 major
natural gas markets, six from the U.S. and five from Canada, and determines each
individual markets’ role in price discovery. This is the first study to include numerous
Canadian markets in a North American natural gas market study.
Causal flows modeling using directed acyclic graphs in conjunction with time
series analysis are used to explain the relationships among the markets. Daily gas price
data from 1994 to 2009 are used. The 11 natural gas market prices are tied together with
nine long-run co-integrating relationships. All markets are included in the co-integration
space, providing evidence the markets are integrated. Results show the degree of
integration varies by region. Further results indicate no clear price leader exists among
the 11 markets. Dawn market is exogenous in contemporaneous time, while Sumas
market is an information sink. Henry Hub plays a significant role in the price discovery of markets in the U.S. Midwest and Northeast, but little to markets in the west. The
uncertainty of a markets’ price depends primarily on markets located in nearby regions.
Policy makers may use information on market integration for important policy
matters in efforts of attaining efficiency. Gas traders benefit from knowing the price
discovery relationships.
| Identifer | oai:union.ndltd.org:tamu.edu/oai:repository.tamu.edu:1969.1/ETD-TAMU-2010-12-8815 |
| Date | 2010 December 1900 |
| Creators | Olsen, Kyle |
| Contributors | Mjelde, James W., Bessler, David A. |
| Source Sets | Texas A and M University |
| Language | en_US |
| Detected Language | English |
| Type | Book, Thesis, Electronic Thesis, text |
| Format | application/pdf |
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