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Abstract

Potential structural changes among eight North America natural gas spot markets are investigated. Evidence from parameter instability tests of the long-run pricing relationship infers possible structural changes occurred around 2000 and again around 2009. Possible contributing factors to the structural changes around 2000 are U.S. Federal Energy Regulatory Commission Order, California’s electricity crisis, 9/11 terrorist attacks, changes in imports, and increased price volatility. The likely major contributing factor to the break occurring around 2009 is the shale gas revolution. Extreme weather events appear to cause transient instability, which should not be considered structural shifts. Results shade some light on why previous studies have conflicting results; the failure to consider structural changes. Further studies regarding potential structural changes and their effects on the natural gas market are necessary.

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