International market integration for natural gas? : a cointegration analysis of priced in Europe, North America and Japan

Abstract

We examine the degree of natural gas market integration in Europe, North America and Japan, between the mid 1990₂s and 2002. Our hypothesis is that there was a certain split of prices between Europe and North America. The relationship between the international gas marker prices and their relation to the oil price, are investigated through principal component analysis and Johansen likelihood-based procedures. Both of them show a high level of integration within the European/Japanese and North American markets and that the European/ Japanese and the North American markets are connected to a much lesser extent.