Price dynamics of natural gas and the regional methanol markets
A ‘methanol economy’ based mainly on natural gas as a feedstock has a lot of potential to cope with the current and ongoing concerns for energy security along with the reduction of CO-2 emissions. It is, therefore, important to examine the price dynamics of methanol in order to ascertain whether the...
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| Veröffentlicht in: | Energy policy 2010-03, Vol.38 (3), p.1372-1378 |
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| creator | Masih, A. Mansur M. Albinali, Khaled DeMello, Lurion |
| description | A ‘methanol economy’ based mainly on natural gas as a feedstock has a lot of potential to cope with the current and ongoing concerns for energy security along with the reduction of CO-2 emissions. It is, therefore, important to examine the price dynamics of methanol in order to ascertain whether the price of methanol is mainly natural-gas-cost driven or demand driven in the context of different regions. This paper is the first attempt to investigate the following: (i) is the natural gas price significantly related to the regional methanol prices in the Far East, United States and Europe? (ii) who drives the regional methanol prices? The paper is motivated by the recent and growing debate on the lead-lag relationship between natural gas and methanol prices. Our findings, based on the most recently developed ‘long-run structural modelling’ and subject to the limitations of the study, tend to suggest: (i) natural gas price is cointegrated with the regional methanol prices, (ii) our within-sample error-correction model results tend to indicate that natural gas was driving the methanol prices in Europe and the United States but not in the Far East. These results are consistent, during most of the period under review (1998.5–2007.3), with the surge in demand for methanol throughout the Far East, particularly in China, Taiwan and South Korea, which appears to have played a relatively more dominant role in the Far East compared to that in Europe and the United States within the framework of the dynamic interactions of input and product prices. However, during the post-sample forecast period as evidenced in our variance decompositions analysis, the emergence of natural gas as the main driver of methanol prices in all three continents is consistent with the recent surge in natural gas price fueled mainly, among others, by the strong hedging activities in the natural gas futures/options as well as refining tightness (similar to those that were happening in the crude oil markets). |
| doi_str_mv | 10.1016/j.enpol.2009.11.018 |
| format | Article |
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Our findings, based on the most recently developed ‘long-run structural modelling’ and subject to the limitations of the study, tend to suggest: (i) natural gas price is cointegrated with the regional methanol prices, (ii) our within-sample error-correction model results tend to indicate that natural gas was driving the methanol prices in Europe and the United States but not in the Far East. These results are consistent, during most of the period under review (1998.5–2007.3), with the surge in demand for methanol throughout the Far East, particularly in China, Taiwan and South Korea, which appears to have played a relatively more dominant role in the Far East compared to that in Europe and the United States within the framework of the dynamic interactions of input and product prices. However, during the post-sample forecast period as evidenced in our variance decompositions analysis, the emergence of natural gas as the main driver of methanol prices in all three continents is consistent with the recent surge in natural gas price fueled mainly, among others, by the strong hedging activities in the natural gas futures/options as well as refining tightness (similar to those that were happening in the crude oil markets).</description><identifier>ISSN: 0301-4215</identifier><identifier>EISSN: 1873-6777</identifier><identifier>DOI: 10.1016/j.enpol.2009.11.018</identifier><identifier>CODEN: ENPYAC</identifier><language>eng</language><publisher>Kidlington: Elsevier Ltd</publisher><subject>Applied sciences ; Chemicals ; Cointegration analysis ; Economic data ; Energy ; Energy economics ; Energy policy ; Energy prices ; Exact sciences and technology ; Fossil fuels and derived products ; Gas ; General, economic and professional studies ; Market analysis ; Methanol ; Methodology. 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Mansur M.</creatorcontrib><creatorcontrib>Albinali, Khaled</creatorcontrib><creatorcontrib>DeMello, Lurion</creatorcontrib><title>Price dynamics of natural gas and the regional methanol markets</title><title>Energy policy</title><description>A ‘methanol economy’ based mainly on natural gas as a feedstock has a lot of potential to cope with the current and ongoing concerns for energy security along with the reduction of CO-2 emissions. It is, therefore, important to examine the price dynamics of methanol in order to ascertain whether the price of methanol is mainly natural-gas-cost driven or demand driven in the context of different regions. This paper is the first attempt to investigate the following: (i) is the natural gas price significantly related to the regional methanol prices in the Far East, United States and Europe? (ii) who drives the regional methanol prices? The paper is motivated by the recent and growing debate on the lead-lag relationship between natural gas and methanol prices. Our findings, based on the most recently developed ‘long-run structural modelling’ and subject to the limitations of the study, tend to suggest: (i) natural gas price is cointegrated with the regional methanol prices, (ii) our within-sample error-correction model results tend to indicate that natural gas was driving the methanol prices in Europe and the United States but not in the Far East. These results are consistent, during most of the period under review (1998.5–2007.3), with the surge in demand for methanol throughout the Far East, particularly in China, Taiwan and South Korea, which appears to have played a relatively more dominant role in the Far East compared to that in Europe and the United States within the framework of the dynamic interactions of input and product prices. However, during the post-sample forecast period as evidenced in our variance decompositions analysis, the emergence of natural gas as the main driver of methanol prices in all three continents is consistent with the recent surge in natural gas price fueled mainly, among others, by the strong hedging activities in the natural gas futures/options as well as refining tightness (similar to those that were happening in the crude oil markets).</description><subject>Applied sciences</subject><subject>Chemicals</subject><subject>Cointegration analysis</subject><subject>Economic data</subject><subject>Energy</subject><subject>Energy economics</subject><subject>Energy policy</subject><subject>Energy prices</subject><subject>Exact sciences and technology</subject><subject>Fossil fuels and derived products</subject><subject>Gas</subject><subject>General, economic and professional studies</subject><subject>Market analysis</subject><subject>Methanol</subject><subject>Methodology. Modelling</subject><subject>Modelling</subject><subject>Natural energy</subject><subject>Natural gas</subject><subject>Natural gas prices</subject><subject>Price dynamics of methanol and natural gas</subject><subject>Price dynamics of methanol and natural gas Time-series modelling</subject><subject>Regional analysis</subject><subject>Studies</subject><subject>Time series</subject><subject>Time-series modelling</subject><issn>0301-4215</issn><issn>1873-6777</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>2010</creationdate><recordtype>article</recordtype><sourceid>X2L</sourceid><sourceid>7TQ</sourceid><recordid>eNqFkVGL1DAQx4souJ5-Al-KoD61TpI2aR9EjkNPYUEf9DlM0-lt1m5ak-7Bfnun7nEP93AGJgnhN__MzD_LXgsoBQj9YV9SmKexlABtKUQJonmSbURjVKGNMU-zDSgQRSVF_Tx7kdIeAKqmrTbZpx_RO8r7U8CDdymfhjzgcow45jeYcgx9vuwoj3Tjp8CPB1p2GCa-YPxNS3qZPRtwTPTq7rzIfn35_PPqa7H9fv3t6nJbOG3qpSCtkMj0iFTVplOACDUSuK5RbWd0DcIZkqaloRvM0DcE1BnsNGnsXT2oi-z9WXeO058jpcUefHI0jhhoOiZrKqUaBUYw-e5RUhn-Rov2v6AUSoKWq-KbB-B-OkaeBjNQqwpaXTOkzpCLU0qRBjtHz0M6WQF2Ncnu7T-T7GqSFcKySZy1PWdFmsndpxCvQCt8axWqhrcThwTWUujXN46ZQ3A7lrfG7pYDy729qxSTw3GIGJxP97JS1i0YtXb08cwRW3brKdrkPAVHvY_kFttP_tGy_wLUd8H7</recordid><startdate>20100301</startdate><enddate>20100301</enddate><creator>Masih, A. 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| subjects | Applied sciences Chemicals Cointegration analysis Economic data Energy Energy economics Energy policy Energy prices Exact sciences and technology Fossil fuels and derived products Gas General, economic and professional studies Market analysis Methanol Methodology. Modelling Modelling Natural energy Natural gas Natural gas prices Price dynamics of methanol and natural gas Price dynamics of methanol and natural gas Time-series modelling Regional analysis Studies Time series Time-series modelling |
| title | Price dynamics of natural gas and the regional methanol markets |
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