NATURAL GAS IMPORT DYNAMICS AND RUSSIA'S ROLE IN THE SECURITY OF GERMANY’S SUPPLY STRATEGY

Policy Summary: The aim of this paper is to explain the natural gas demand dynamics of Germany and to determine the factors affecting the import of natural gas from Russia. In the existing literature, there are several studies which investigate the demand structure of single sectors (like industry or households), but there is a lack of analysis that tries to explain import quantities as a whole. On the basis of a theoretical discussion, the components of natural gas import quantities have been tested through different time series analysis. We found that the European natural gas and oil prices are co integrated with a time lag of 7 months. We interpret this result as revealing that natural gas is a viable substitute for oil. The time series estimation results support our hypothesis and demonstrate a positive relationship between oil price and natural gas demand. Furthermore, we found that the German industry production level is also an important determinant for natural gas import. In the next step, we used a technologica