Macroeconomic uncertainty and natural gas prices: Revisiting the Asian Premium

Elsevier BV
Publication Type:
Journal Article
Energy Economics, 2021, 94, pp. 105081-105081
Issue Date:
Full metadata record
© 2021 Elsevier B.V. While macroeconomic uncertainty and its impact on commodity, mainly oil prices, have been frequently studied, there is no study investigating the role of macroeconomic uncertainty in natural gas pricing. To fill this gap, we construct homogeneous macroeconomic uncertainty measures for three major natural gas markets and investigate the dynamic causal effects of macroeconomic uncertainty shocks on the formation of natural gas prices. We show that macroeconomic uncertainty plays a vital role in determining natural gas price variations, in addition to driving business cycle fluctuations in these economies. Compared to oil price, the uncertainty impact on gas pricing is relatively moderate but significant. Market-specific supply and demand analysis shows the drivers of gas prices are substantially different in three different markets, which helps to understand the “Asian Premium” phenomenon in the natural gas trade.
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