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Will Natural Gas Prices Decouple From Oil Prices Across the Pond?

Author/Editor: Reinout De Bock | José G. Gijón-Spalla
Authorized for Distribution: June 1, 2011
Electronic Access: Free Full Text (PDF file size is 1,260KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: We show that US natural gas prices have decoupled from oil prices following substantial institutional and technological changes. We then examine how this interrelationship has evolved in Europe using data for Algeria, one of Europe’s key gas suppliers. Taking into account total gas exports and cyclical conditions in partner countries, we find that gas prices remain linked to oil prices, though the nexus has loosened. Both high oil prices and a modest industrial recovery in partner countries have kept gas exports at low levels in recent years, suggesting changing market forces. The paper then shows how such shifts can have important macroeconomic implications for a big gas exporter such as Algeria.
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Series: Working Paper No. 11/143
Subject(s): Natural gas | Commodity prices | Algeria | Oil | Economic models | External shocks | Oil prices | Production
Author's keyword(s): Natural gas; Commodity prices; Gas exporters; Energy economics; Algeria; Oil; Vector autoregressions
    Published:   June 1, 2011        
    ISBN/ISSN:   9781455266449/1018-5941   Format:   Paper
    Stock No:   WPIEA2011143   Pages:   21
    Price:   US$18.00
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