Energy Economics and Financial Markets.

AuthorSadorsky, Perry

Energy Economics and Financial Markets, edited by ANDRE DORSMAN,JOHN L. SIMPSON, and WIM WESTERMAN (Springer Berlin Heidelberg, 2013). 250 pages, ISBN 978-3-642-30600-6, Hardcover.

Energy economics and finance are important and timely topics to study. This edited volume of 13 chapters is divided into sections on supply and demand, environmental issues and renewables, the dynamics of energy derivatives trading, and finance and energy.

The first chapter by John L. Simpson, Wim Westerman and Andre Dorsman introduces the book to readers. Here the editors acknowledge that by casting the net of topics rather wide, they run the risk of not providing a fully detailed analysis of any one major topic. Their objective is to draw attention to applied research in several important areas of energy economics and finance. The title of the book is somewhat misleading because rather than providing a comprehensive overview of the main theoretical and empirical issues in the field of energy economics and finance, the book is more oriented towards a selection of specific topics.

The second chapter by Helen Cabalu and Cristina Alfonso derives a composite natural gas security index for six Asian economies (Japan, Korea, China, India, Singapore and Thailand). Countries that do not have adequate natural gas reserves need to rely on imports and imports are vulnerable to supply disruptions. The authors find that India and China are less vulnerable to natural gas supply disruptions because of their large domestic natural gas reserves and small share of natural gas in the overall energy mix. I found this chapter interesting but somewhat weak on specific recommendations for what vulnerable countries can do to reduce their vulnerability to natural gas supply disruptions.

In chapter 3, John L. Simpson analyzes buyer credit pricing for natural gas exports. Buyer credit pricing for natural gas exports refers to situations in which the buyer needs to arrange credit in order to buy the natural gas. The basic hypothesis of the chapter is that country risk premia derived from country risk ratings should be important drivers behind buyer credit pricing. This hypothesis is tested using cointegration analysis on data from China and the U.S. Cointegration is found between buyer credit and country risk ratings for each county. Country risk ratings are more important in the case of China.

In chapter 4, Ayhan Kapusuzoglu and Mehmet Baha Karan investigate the dynamic relationship...

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