How Does the U.S. Natural Gas Market React to Demand and Supply Shocks in the Crude Oil Market?

Forthcoming in: Energy Economics

24 Pages Posted: 18 Jan 2017

See all articles by Ali Jadidzadeh

Ali Jadidzadeh

University of Calgary

Apostolos Serletis

University of Calgary - Department of Economics

Date Written: January 16, 2017

Abstract

In this paper we use monthly data (over the period from January 1976 to December 2012) and a structural VAR model to disentangle demand and supply shocks in the global crude oil market and investigate their effects on the real price of natural gas in the United States. We identify the model by assuming that innovations to the real price of crude oil are predetermined with respect to the natural gas market and show that close to 45% of the variation in the real price of natural gas can be attributed to structural supply and demand shocks in the global crude oil market.

Keywords: Oil price, Oil price shocks, Structural VAR

JEL Classification: C32, Q4

Suggested Citation

Jadidzadeh, Ali and Serletis, Apostolos, How Does the U.S. Natural Gas Market React to Demand and Supply Shocks in the Crude Oil Market? (January 16, 2017). Forthcoming in: Energy Economics. Available at SSRN: https://ssrn.com/abstract=2900582

Ali Jadidzadeh

University of Calgary ( email )

University Drive
Calgary, Alberta T2N 1N4
Canada

Apostolos Serletis (Contact Author)

University of Calgary - Department of Economics ( email )

2500 University Drive, NW
Calgary, Alberta T2N 1N4
Canada
403 220-4091 (Phone)
403 282-5262 (Fax)

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