Abstract
This paper assesses the degree of market integration in the U.S. natural gas market following the FERC’s ‘open access’ reforms. Daily spot prices at 76 market locations from 1993 to 1997 are used to examine the geographic extent of the market and the speed with which market forces move prices toward equilibrium in the face of ongoing price shocks. The empirical results suggest that the East and Central regions form a highly integrated market, but that this market is quite segmented from the more loosely integrated Western market.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
C.B. Barrett (2001) ArticleTitleMeasuring integration and efficiency in international agricultural markets Review of Agricultural Economics 23 IssueID1 19–32 Occurrence Handle10.1111/1058-7195.00043
E.J. Brinkman R. Rabinovitch (1995) ArticleTitleRegional limitations on the hedging effectiveness of natural gas futures Energy Journal 16 IssueID3 113–124
Y.-W. Cheung K.S. Lai (2000) ArticleTitleOn the purchasing power parity puzzle Journal of International Economics 52 IssueID2 312–330 Occurrence Handle10.1016/S0022-1996(99)00056-2
C.A. Dahl T.K. Matson (1998) ArticleTitleEvolution of the U.S. natural gas industry in responses to changes in transaction costs Land Economics 74 IssueID3 390–408
A. Deaton G. Laroque (1992) ArticleTitleOn the behavior of commodity prices Review of Economic Studies 59 1–23
A.S. Vany ParticleDe W.D. Walls (1993) ArticleTitlePipeline access and market integration in the natural gas industry: Evidence from cointegration tests Energy Journal 14 1–19
R. Engle (2004) ArticleTitleRisk and volatility: Econometric models and financial practice American Economic Review 94 IssueID3 405–420
Federal Energy Regulatory Commission (1992). Pipeline service obligations and revisions to regulations governing self-implementing transportation under part 284 of the Commission’s Regulations (Docket No. RM91-11-000) and Regulation of Natural Gas Pipelines After Partial Wellhead Decontrol (Docket No. RM87-34-065), (Order No. 636, Final Rule), April 8.
P.A. Geroski (1998) ArticleTitleThinking creatively about markets International Journal of Industrial Organization 16 677–695 Occurrence Handle10.1016/S0167-7187(98)00012-5
P.A. Geroski A. Jacquemin (1988) ArticleTitleThe persistence of profits: A European comparison Economic Journal 98 375–389
P.K. Goldberg F. Verboven (2005) ArticleTitleMarket integration and convergence to the law of one price: Evidence from the European car market Journal of International Economics 65 49–73 Occurrence Handle10.1016/j.jinteco.2003.12.002
J.D. Hamilton (1994) Time series analysis Princeton University Press Princeton, NJ
Herbert, J.H., Thompson, J.M., & Todaro, J. (1997). Recent trends in natural gas spot prices. Energy Information Administration/Natural Gas Monthly, December 1997.
M. King M. Cuc (1996) ArticleTitlePrice convergence in north American natural gas spot markets Energy Journal 17 IssueID2 17–42
A.N. Kleit (1998) ArticleTitleDid open access integrate natural gas markets: An arbitrage cost approach Journal of Regulatory Economics 14 19–33 Occurrence Handle10.1023/A:1008067504059
A.N. Kleit (2001) ArticleTitleDefining electricity markets: An arbitrage cost approach Resource and Energy Economics 23 259–270 Occurrence Handle10.1016/S0928-7655(01)00039-2
A. Marshall (1920) Principles of economics EditionNumber8 Macmillan London
S. Ng P. Perron (2001) ArticleTitleLag length selection and the construction of unit root tests with good size and power Econometrica 69 IssueID6 1519–1554 Occurrence Handle10.1111/1468-0262.00256
K. Rogoff (1996) ArticleTitleThe purchasing power parity puzzle Journal of Economic Literature 34 647–668
P.A. Samuelson (1952) ArticleTitleSpatial price equilibrium and linear programming American Economic Review 42 IssueID3 283–303
P.T. Spiller C.J. Huang (1986) ArticleTitleOn the extent of the market: Wholesale gasoline in the Northeastern United States Journal of Industrial Economics 35 IssueID2 131–145
P.T. Spiller R.O. Wood (1988) ArticleTitleThe estimation of transaction costs in arbitrage models Journal of Econometrics 39 309–326 Occurrence Handle10.1016/0304-4076(88)90061-9
D.F. Spulber M.J. Doane (1994) ArticleTitleOpen access and the evolution of the U.S. spot market for natural gas Journal of Law and Economics 37 IssueID2 477–517
G.J. Stigler R.A. Sherwin (1985) ArticleTitleThe extent of the market Journal of Law and Economics 28 IssueID3 555–585 Occurrence Handle10.1086/467101
F.J. Sturm (1997) Trading natural gas: cash, futures, options, and swaps PennWell Publishing Company Tulsa, OK
R.J. Sutherland (1993) ArticleTitleNatural gas contracts in an emerging competitive market Energy Policy 21 IssueID12 1191–1204 Occurrence Handle10.1016/0301-4215(93)90269-L
A.M. Taylor (2001) ArticleTitlePotential pitfalls for the purchasing-power-parity puzzle? Sampling and specification biases in mean-reversion tests of the law of one price Econometrica 69 IssueID2 473–498 Occurrence Handle10.1111/1468-0262.00199
G.J. Werden L.M. Froeb (1993) ArticleTitleCorrelation, causality, and all that jazz: The inherent shortcomings of price tests for antitrust market delineation Review of Industrial Organization 8 329–353
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Cuddington, J.T., Wang, Z. Assessing the Degree of Spot Market Integration for U.S. Natural Gas: Evidence from Daily Price Data. J Regul Econ 29, 195–210 (2006). https://doi.org/10.1007/s11149-006-6035-2
Issue Date:
DOI: https://doi.org/10.1007/s11149-006-6035-2