Natural Gas Price Forecasting in a Changing World

39 Pages Posted: 29 Nov 2021

See all articles by Sara Farhangdoost

Sara Farhangdoost

West Virginia University, Davis College of Agriculture, Forestry, and Consumer Sciences, Division of Resource Management, Students

Xiaoli Etienne

West Virginia University - Division of Resource Management

Abstract

Natural gas price forecasting is critical to many macroeconomic projection models and plays a vital role in state budget planning in energy-producing states. We examine the performances of various individual and composite forecasting models when predicting natural gas prices in the United States. We find the forecast generated by the Energy Information Administration Short-Term Energy Outlook provides a more accurate price prediction at longer forecasting horizons while futures-based forecasts perform better in the short run. Projections based on time-series models perform well at longer forecast horizons when price volatility is relatively low. Further, the Hotelling model performs well for 1- and 3-month ahead forecast horizons. Our findings further support the additional benefit of composite forecasts based on individual methods for more accurate predictions; however, the performance is not uniform at different forecasting horizons.

Keywords: natural gas, price forecast, vector autoregressions, futures prices, forecast evaluation, composite forecast

Suggested Citation

Farhangdoost, Sara and Etienne, Xiaoli, Natural Gas Price Forecasting in a Changing World. Available at SSRN: https://ssrn.com/abstract=3973309 or http://dx.doi.org/10.2139/ssrn.3973309

Sara Farhangdoost

West Virginia University, Davis College of Agriculture, Forestry, and Consumer Sciences, Division of Resource Management, Students ( email )

Morgantown, WV
United States

Xiaoli Etienne (Contact Author)

West Virginia University - Division of Resource Management ( email )

Morgantown, WV 26506
United States

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