Is this essential for Japan to changes its LNG import policy? Some evidence of the OPEC crude oil price shocks

Main Article Content

Mostafa Raeisi Sarkandiz http://orcid.org/0000-0003-4612-6875

Abstract

In this study, Japan's LNG import contracts are discussed. Given the importance that these contracts are oil-indexation, the impact of crude oil price volatility (emphasizing OPEC oil basket) on LNG prices was studied using a structural VAR model from January 1997 to October 2017. Also, the Hodrick-Prescott filter was used to separate positive and negative shocks to investigate the effect of oil price shocks on LNG prices. The results showed that the relationship between LNG and crude oil prices has increased over time and that the effect of price shocks was asymmetric so that the impact of positive shocks was more lasting and more significant than negative shocks. This imbalance indicates that the basic oil contracting mechanism generally works to secure sellers' rights. So Japan needs to reform its contracts. Looking at gas sales contracts elsewhere in the world, it seems that the best alternative to current contracts would be the formation of an LNG hub in the North and East Asian region with the focus on Japan or Singapore.

Article Details

How to Cite
RAEISI SARKANDIZ, Mostafa. Is this essential for Japan to changes its LNG import policy? Some evidence of the OPEC crude oil price shocks. Economics, Management and Sustainability, [S.l.], v. 5, n. 1, p. 29-41, apr. 2020. ISSN 2520-6303. Available at: <https://jems.sciview.net/index.php/jems/article/view/91>. Date accessed: 08 aug. 2020. doi: https://doi.org/10.14254/jems.2020.5-1.3.
Section
Articles

References

Asche, F., Osmundsen, P., & Sandsmark, M. (2006). The UK market for natural gas, oil and electricity: are the prices decoupled?. The Energy Journal, 27(2), 27-40.
Barcella, M. L. (1999, May). The pricing of gas. In Oxford Energy Forum. Oxford Institute for Energy Studies, Oxford. May.
Petroleum, B. (2018). British Petroleum Statistical Review of World Energy. British Petroleum Corporate Communications Services, London.
Dahl, R. E., Oglend, A., Osmundsen, P., & Sikveland, M. (2012). Are oil and natural gas going separate ways in the United Kingdom? Cointegration tests with structural shifts. The Journal of Energy Markets, 5(2), 33-58.
Dickey, D. A., & Fuller, W. A. (1981). Likelihood ratio statistics for autoregressive time series with a unit root. Econometrica: Journal of the Econometric Society, 1057-1072.
Erdős, P. (2012). Have oil and gas prices got separated?. Energy Policy, 49, 707-718.
Fujime, K. (2015). LNG Market and Price Formation in East Asia. Institute of Energy Economics, Japan.
Fulwood, M. (2018). Asian LNG Trading Hubs: Myth or Reality?. Center on Global Energy Policy, May.
Geng, J. B., Ji, Q., & Fan, Y. (2014). A dynamic analysis on global natural gas trade network. Applied Energy, 132, 23-33.
Granger, C. W. J. (1696). Investigating Causal Relations by Econometric Models and Cross-Spectral Methods. Econometrica, 37(3), 424-438.
Hannan, E. J., & Quinn, B. G. (1979). The determination of the order of an autoregression. Journal of the Royal Statistical Society: Series B (Methodological), 41(2), 190-195.
Hartley, P. R., Medlock III, K. B., & Rosthal, J. E. (2008). The relationship of natural gas to oil prices. The Energy Journal, 29(3), 47-65.
Hodrick, R. J., & Prescott, E. C. (1997). Postwar US business cycles: an empirical investigation. Journal of Money, Credit, and Banking, 29(1), 1-16.
Jadidzadeh, A., & Serletis, A. (2017). How does the US natural gas market react to demand and supply shocks in the crude oil market?. Energy Economics, 63, 66-74.
Jarque, C. M., & Bera, A. K. (1980). Efficient tests for normality, homoscedasticity and serial independence of regression residuals. Economics Letters, 6(3), 255-259.
Jensen, J. T. (2004). The development of a global LNG market: is it likely? If so, when?. Oxford Institute for Energy Studies.
Johansen, S. (1988). Statistical analysis of cointegration vectors. Journal of Economic Dynamics and Control, 12(2-3), 231-254.
Kilian, L. (2009). Not all oil price shocks are alike: Disentangling demand and supply shocks in the crude oil market. American Economic Review, 99(3), 1053-69.
Lee, J., & Song, J. (2012). Oil and Small Open Macroeconomy: A case of Korea. Global Economic Review, 41(1), 77-95.
Manzoor, D., & Seiflou, S. (2011). Are crude oil, gas and coal prices co integrated?. Iranian Economic Review, 15(28), 29-51.
Nick, S., & Thoenes, S. (2013). What drives natural gas prices? A structural VAR approach. Institute of Energy Economics at the University of Cologne, EWI Working Paper No. 13/02, Germany.
Ramberg, D. J., & Parsons, J. E. (2012). The weak tie between natural gas and oil prices. The Energy Journal, 33(2), 13-35.
Rezazadeh Karsalari, A., & Behrooznia, F. H. A. (2013). The effects of oil price shocks on real GDP in Iran. African Journal of Business Management, 7(33), 3220-3232.
Skjæveland, K., & Thompson, T. H. (2013). The end of a long term relationship between the price of crude oil and natural gas: a cointegration approach (Master's thesis). University of Bergen, Norway.
Ten Kate, W., Varró, L., & Corbeau, A. S. (2013). Developing a Natural Gas Trading Hub in Asia: Obstacles and Opportunities. International Energy Agency.
Toda, H. Y., & Yamamoto, T. (1995). Statistical inference in vector autoregressions with possibly integrated processes. Journal of Econometrics, 66(1-2), 225-250.
Panagiotidis, T., & Rutledge, E. (2007). Oil and gas markets in the UK: Evidence from a cointegrating approach. Energy economics, 29(2), 329-347.
Villar, J. A., & Joutz, F. L. (2006). The relationship between crude oil and natural gas prices. Energy Information Administration, Office of Oil and Gas, 1-43. Retrieved from http://www.uprm.edu/aceer/pdfs/CrudeOil_NaturalGas.pdf.
World Energy Council. (2013). World Energy Resources: Natural gas. London.
Suzuki, T. (2006). Future LNG price in Asian market. Tokyo Institute of Energy Economics, Japan.
Shi, X. (2016). The Impact of Low Oil Prices on Natural Gas and the Implications for the Asia-Pasific. Pacific Energy Summit, Working Paper, Singapore.
Zamani, N. (2016). How the crude oil market affects the natural gas market? Demand and supply shocks. International Journal of Energy Economics and Policy, 6(2), 217-221.