The Relationship Between The Prices Of Natural Gas And Oil Based On The Cointegration Analysis With Structure Shifts

Natural gas is not only substitute to oil in electric generation and industrial sectors,but also rival and competitor in production field,they compete for similar economic resources such as labor and drilling rigs,moreover,some natural gas is co-product of oil.Finally,with the breakthrough of the technology of liquefying natural gas,the trade of liquefied natural gas(LNG)around the world increased greatly,and most LNG contracts are indexed on oil prices,which directly linking natural gas prices to oil prices.All these economic factors suggest that the price of natural gas has strong relationship with oil price.However,recently some in energy field are wondering whether the price of natural gas decoupled with oil price following the institutional and technological changes.To answer this doubt,the thesis examines the relationship between natural gas price in North America and the crude oil price from January 1997 to December 2015 with cointegration analysis.Taking into account the substantial changes in natural gas market and oil market,the paper finds that the natural gas price in North America is still tied to crude oil price,they keep a long-term equilibrium to which natural gas price would always reverted after exogenous shocks.The shocks to the natural gas market and international oil market,such as US shale gas revolution,just bring structural breaks to the cointegration of gas price and oil price,the cointegration relationship between them shift from one state to another new state.