Czy powiązania na europejskich rynkach gazu są odporne na wyjątkowe wstrząsy?
[How immune is the connectedness of European natural gas markets to exceptional 
shocks?] (*)

Sławomir Śmiech (Department of Statistics, UE Kraków)


Numerous studies underline strong ties between European natural gas markets but 
they do not account for the Russian invasion of Ukraine, a true test for market 
integration causing serious disruptions in natural gas supply and triggering 
elevated uncertainty. In this article we describe how the joint dynamics of 
natural gas prices quoted at four major European hubs evolved during the 
turbulent period of 2021-2022. We present various spillover measures applied to 
the TVP-VAR-SV model to find that the total connectedness declined markedly 
after the Russian invasion of Ukraine. We show that this drop was almost 
entirely driven by the price divergence on the UK market, whereas continental 
hubs remained tightly integrated. Finally, we provide new evidence that price 
transmission among European markets is driven predominantly by short-term 
frequencies, with connectedness measures for day- and month-ahead markets 
sharing common medium-term trends, but different short-term dynamics. These 
findings grant three policy implications. First, due to pipelines capacity 
constrains the UK market might decouple from the continental one in turbulent 
periods. Second, to facilitate full market integration further infrastructure 
development across Europe is essential. Third, common price changes are driven 
by short-term rather than long-term factors.

(*) Joint work with Monika Papież, Michał Rubaszek and Karol Szafranek.