Inderscience Publishers

Market integration for natural gas in Europe

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In this paper, we examine the degree of market integration in French gas imports. Are there substantial price differences between gas from different export countries, and do prices move together? Furthermore, we analyse to what extent the French, German and Belgian markets are integrated. The long-term take-or-pay contracts are described and analysed. Time series of Norwegian, Dutch and Russian gas export prices are examined for the period 1990-1997. Co-integration tests show that the different border prices for gas to France move proportionally over time, indicating that the Law of One Price holds. Although one could expect different producer countries to have different supply obligations, we do not find any significant differences in mean prices. When the study is extended to an inter-country analysis, including Germany and Belgium, we find that national markets are highly integrated.

Keywords: market integration, natural gas, gas markets, co-, integration, JEL class no C33,D43,L72, Q41

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