How Far is Gas from becoming a Global Commodity?

While we can say that there is a global market for crude oil, we cannot say the same for natural gas. There is a strand of literature that argues that, in the last decades, gas markets have become less regional and more global. We use wavelets to test this hypothesis and conclude otherwise: although the European and Japanese gas markets are significantly synchronized, they are much less than the oil markets, which we take as the benchmark. We also show that the North American gas market fluctuations are independent of the other gas markets. Finally, we show that the existing synchronization between gas markets almost vanishes once one filters out the effect of oil price variations, suggesting that it is the global oil market that connects the regional gas markets.

Automated summary

Research shows that while European and Japanese gas markets are significantly synchronized, the synchronization is lower compared to oil markets. Fluctuations in the North American gas market are independent of other markets. Filtering out the effect of oil price variations, the existing synchronization between gas markets almost disappears.