Price Convergence Across Natural Gas Fields and City Markets*
- 1 October 1994
- journal article
- Published by SAGE Publications in The Energy Journal
- Vol. 15 (4) , 37-48
- https://doi.org/10.5547/issn0195-6574-ej-vol15-no4-3
Abstract
This research reports the results of cointegration tests between natural gas spot prices at various production fields, pipeline hubs, and city markets. Cointegration between prices is evidence that spatial arbitrage is enforcing the law of one price across market locations. The results show that prices at certain city markets, Chicago and to a lesser extent California, are cointegrated with prices at field markets. However, the prices at most other locations do not move in step with gas prices in the field markets. Customer access to pipeline transportation, or competitive bypass, may explain why prices at some city markets are more responsive to production field prices than others.Keywords
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