Time-varying determinants of China's liquefied natural gas import price: A dynamic model averaging approach

We adopt a dynamic model averaging (DMA) approach to study the time-varying impacts of several domestic and international factors on the volatility and premium of China's liquefied natural gas (LNG) import price from January 2008 to December 2020. China's LNG import price tends to be more affected by domestic market in-formation than by international crude oil prices. The demand side factors in the domestic market, including gas consumption, weather conditions and industrial growth, are shown to be the major drivers of the dynamics of China's LNG import price. Relative to the influences of the US or European gas markets, China's LNG import price is more sensitive to the impacts of its Japanese counterpart, which could be attributed to their similar pricing mechanisms. The high premium of China's LNG import price is also largely caused by increasing domestic energy demands. Our results further provide evidence of the benefits of marketizing the natural gas pricing in China. While trying to secure natural gas supply, more efforts should be made to keep promoting the liberali-sation and marketisation of the domestic natural gas market.

Automated summary

In this study, a dynamic model averaging approach is used to analyze the time-varying impacts of various domestic and international factors on China's LNG import price. The results show that domestic market information has a greater influence on the price than international crude oil prices. Factors such as gas consumption, weather conditions, and industrial growth in the domestic market are identified as major drivers of the dynamics of China's LNG import price. Additionally, China's LNG import price is found to be more sensitive to the impacts of the Japanese market compared to the US or European markets.