Bridging the Atlantic : The Integration of European and North American Natural Gas Markets
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- Master Thesis 
The purpose of this thesis is to answer the question whether the transatlantic market for natural gas is integrated or not. The driving forces that are presently influencing the market and which forces might influence the market in the future are also investigated. Regulatory efforts, the growth of LNG trade, and the shale gas revolution have been some of the most influential factors on the natural gas market in the previous two decades. While the exact future role of natural gas is unclear, it is a key component of many technological appli-cations. Most recently, the COVID-19 pandemic has changed economic conditions around the world dramatically and is one of the causes for the 2021 global natural gas price surge. We analyze daily price data from six gas trading hubs, two in North America and four in Europe, between January 2016 and November 2021. The analysis consists of bivariate cointe-gration tests developed by Engle and Granger, and the multivariate cointegration test devel-oped by Johansen. Additionally, we test for Granger causality. The cointegration tests indicate that there is a long-term relationship between the prices at all the analyzed trading hubs. Interestingly, not all hubs show significant adjustment tendencies towards the long-term equilibrium. Furthermore, we do not find any Granger causality be-tween hubs on different continents. These mixed results do not allow us to conclude that the markets are perfectly integrated, but a certain degree of integration is undeniable. Moreover, the research done for this thesis has provided an optimal opportunity to critically examine and discuss the future role of natural gas. The future development of the market for natural gas is likely to be influenced by its role in a transition to a low carbon emission econ-omy. The utilization of natural gas as a bridge fuel or its relation to hydrogen could justify the further development of natural gas markets and efforts towards more market integration.