Is the price cap for gas useful? Evidence from European countries
Year: 2025
Type: article
Abstract: Since Russia’s invasion of Ukraine, many countries have pledged to end or restrict their oil and gas imports to curtail Moscow’s revenues and hinder its war effort. Thus, the European ministers agreed to trigger a cap on the gas price. To detect the importance of the price cap for gas, we provide a mixture representation for the gas price to detect the presence of outliers made by a truncated normal distribution and a uniform one. We focus our analysis on a unique dataset of different commodity prices for Germany and Italy, which are major Russian gas importers by exploiting the response of the different commodities to a gas shock through a Bayesian vector autoregressive (VAR) model. As a result, including a lower gas price cap smooths the impact of a gas shock on electricity prices, while not considering a price cap will increase exponentially this impact. Regarding the other commodities, gas shocks matter in the short and long run when a price cap is not considered.
Source: The Annals of Applied Statistics
DOI: 10.1214/25-aoas2016
Authors: Francesco Ravazzolo, Luca Rossini
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
SDG: Climate action
Open Access status: green
OpenAlex ID: W4410804905