Declining Integration in the US Natural Gas Market

Héctor Nuñez, Profesor Investigador Titular de la División de Economía del CIDE, Andres Trujillo Barrera y Xiaoli Etienne escribieron el artículo Declining Integration in the US Natural Gas Market en la revista Resources Policy.



Using price data from the lower 48 states, we find that regional natural gas market in the US has become less integrated since the rise of shale production. Price pairs for those states with significant shale production, as well as for major consumption states, show a particularly high reduction in integration. However, the degree of integration has stabilized in recent years, especially after 2016. For state pairs with integrated prices, we show that it takes longer to correct any disequilibrium from the long-run price relationship during the shale boom, indicating slower information transmission. Pipeline capacity and distances play a key role in determining information transmission throughout the sample period, while production, consumption, and storage levels have become more important in recent years. The analysis suggests significant welfare gains from efforts to improve natural gas market integration, such as pipeline and storage capacity expansion projects.


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