Time-varying determinants of China's liquefied natural gas import price: A dynamic model averaging approach
2022
Wang, Tiantian | Qu, Wan | Zhang, Dayong | Ji, Qiang | Wu, Fei
We adopt a dynamic model averaging (DMA) approach to study the time-varying impacts of several domestic and international factors on the volatility and premium of China's liquefied natural gas (LNG) import price from January 2008 to December 2020. China's LNG import price tends to be more affected by domestic market information than by international crude oil prices. The demand side factors in the domestic market, including gas consumption, weather conditions and industrial growth, are shown to be the major drivers of the dynamics of China's LNG import price. Relative to the influences of the US or European gas markets, China's LNG import price is more sensitive to the impacts of its Japanese counterpart, which could be attributed to their similar pricing mechanisms. The high premium of China's LNG import price is also largely caused by increasing domestic energy demands. Our results further provide evidence of the benefits of marketizing the natural gas pricing in China. While trying to secure natural gas supply, more efforts should be made to keep promoting the liberalisation and marketisation of the domestic natural gas market.
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