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International Market Intergration for Natural Gas? A Cointergration Analysis of Prices in Europe, North America, and Japan

Guillaume L\'Hegaret, Boriss Siliverstovs, and Christian von Hirschhausen

January 2004

Guillaume L\'Hegaret, Boriss Siliverstovs, and Christian von Hirschhausen,†January 2004

We examine the degree of natural gas market integration in Europe, North America and Japan, between the mid 1990ís and 2002. Our hypothesis is that there was a certain split of prices between Europe and North America. The relationship between the international gas marker prices and their relation to the oil price, are investigated through principal component analysis and Johansen likelihood-based procedures. Both of them show a high level of integration within the European/Japanese and North American markets and that the European/ Japanese and the North American markets are connected to a much lesser extent.

 

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