The Effects of Climate and Oil Prices on Residential Natural Gas Prices: With an Application to 11 OECD Countries

This study examines the effects of climate and oil prices on residential natural gas prices in selected 11 OECD countries by using panel data for the period 1992-2016. After applying the panel unit root tests, the parameters are estimated using Common Correlated Effects Pooled (CCEP) method. Moreover, Emirmahmutoglu-Kose (2011) test is used to test the panel causality between the variables. The results revealed that in the long run, the heating degree days have a statistically significant and negative effect on natural gas prices used in the residential sector in selected OECD countries, while there is an insignificant relationship between oil prices and natural gas prices used in the residential sector in these countries. It is also found to be a causality of heating degree days to natural gas prices.