Are European Natural Gas Prices Converging? An Analysis for Industrial Consumers
12:30 - 13:30
The European Union is devoting consideral effort to create a single EU gas market through a series of Directives and regulations. In order to assess whether the new regulatory framework has been successful so far, we investigate the convergence of prices paid by industrial consumers for natural gas provision in a selection of European countries, assuming that a higher price convergence among countries points to a higher degree of market integration. We test for market integration across eight European countries for the period 1991-2014 by carrying out a cointegration analysis, checking for long-run equilibrium between pairs of EU markets. Subsequently, we employ time-varying coefficients models that better fit the dynamic structure of EU gas markets of the last two decades. Empirical results suggest an ongoing price convergence process since the beginning of the 2000s with levels that vary across countries. Furthermore, we control for the separate effects of direct and indirect taxation.
This seminar has been jointly organized by FEEM and IEFE, Bocconi University.