The Weak Tie Between Natural Gas and Oil （天然气和石油之间的弱连接）.pdf

The Weak Tie Between Natural Gas and Oil Prices David J. Ramberg* and John E. Parsons** Several recent studies establish that crude oil and natural gas prices are cointegrated. Yet at times in the past, and very powerfully in the last two years, many voices have noted that the two price series appear to have “decoupled”. We explore the apparent contradiction between these two views. We find that recognition of the statistical fact of cointegration needs to be tempered with two additional points. First, there is an enormous amount of unexplained volatility in natural gas prices at short horizons. Hence, any simple formulaic relationship between the prices will leave a large portion of the natural gas price unexplained. Second, the cointegrating relationship does not appear to be stable through time. The prices may be tied, but the relationship can shift dramatically over time. Therefore, although the two price series may be cointegrated, the confidence intervals for both short and long time horizons are large. Keywords: Oil price, Natural gas price, Cointegration /10.5547/019565 1. INTRODUCTION A number of recent academic studies have established that natural gas and crude oil prices are cointegrated.1 These results have had an impact on ana- * MIT Engineering Systems Division and the MIT Center for Energy and Environmental Policy Research, MIT, E19-411, 77 Massachusetts Ave., Cambridge, MA 02139 USA. E-mail: dramberg@. ** Corresponding author. MIT Sloan School of Management, MIT Center for Energy and Envi- ronmental Policy Research, and MIT Joint Program on the Science and Policy of Global Change, E19-411, 77 Massachusetts Ave., Cambridge, MA 02139 USA. E-mail: jparsons@. This research was supported by a grant from BP Technologies Ventures Inc. as a p