Universität zu Köln

Farag, Markos ORCID: 0009-0007-4698-8818, Jeddi, Samir ORCID: 0000-0003-0819-9723 and Kopp, Jan Hendrik ORCID: 0000-0001-7983-6350 (2025). Global Natural Gas Market Integration: The Role of LNG Trade and Infrastructure Constraints. The World Economy, 48 (6). pp. 1405-1417. Wiley. ISSN 0378-5920

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Abstract

This paper analyses the integration of global natural gas markets across North America, Europe, and Asia from 2016 to 2022. The analysis focuses on the impact of the United States emerging as a major liquefied natural gas (LNG) exporter and significant supply disruptions, including the sharp reduction in Russian pipeline supplies to Europe. We identify a structural break on 1 October 2021, coinciding with these supply disruptions and a tightening global LNG market. Using both linear and nonlinear cointegration techniques, we assess price convergence across the three regions in two subsamples: before and after the break. In the first subsample, we find strong integration between all three regional gas markets, driven by growing LNG trade and shared exposure to global spot market dynamics. However, in the second subsample, the degree of integration between the Asian and European markets weakens, with US prices decoupling from both. Granger causality analysis reveals that LNG infrastructure congestion, particularly in the US and Northwest Europe, significantly drives the widening price spreads between the US and European markets. These findings suggest that physical infrastructure plays a central role in energy market integration, especially during periods of tight market conditions, where infrastructure bottlenecks limit arbitrage opportunities. JEL Classification: Q37, Q41, F14, C32, L95

Item Type:	Article
Creators:	Creators Email ORCID ORCID Put Code Farag, Markos UNSPECIFIED https://orcid.org/0009-0007-4698-8818 UNSPECIFIED Jeddi, Samir UNSPECIFIED https://orcid.org/0000-0003-0819-9723 UNSPECIFIED Kopp, Jan Hendrik UNSPECIFIED https://orcid.org/0000-0001-7983-6350 UNSPECIFIED
URN:	urn:nbn:de:hbz:38-796956
Identification Number:	10.1111/twec.13699
Journal or Publication Title:	The World Economy
Volume:	48
Number:	6
Page Range:	pp. 1405-1417
Number of Pages:	13
Date:	30 June 2025
Publisher:	Wiley
ISSN:	0378-5920
Language:	English
Faculty:	Faculty of Management, Economy and Social Sciences
Divisions:	Faculty of Management, Economics and Social Sciences > Economics > Microeconomics, Institutions and markets > Professorship for Energy and Environmental Economics
Subjects:	Economics
['eprint_fieldname_oa_funders' not defined]:	Publikationsfonds UzK
Refereed:	Yes
URI:	http://kups.ub.uni-koeln.de/id/eprint/79695