Abstract
In this paper, we use a tail index estimator to examine how the likelihood of extreme natural gas prices in the German market has evolved between 2011 and 2024. After controlling for the extraordinary supply disruptions associated with the 2022 energy crisis, we find no evidence of a sustained increase in the fatness of price tails over time. While the crisis period clearly heightened the probability of extreme price outcomes, this effect appears to be transient rather than indicative of a permanent structural change. Furthermore, the influence of natural gas demand on tail fatness is less clear-cut once the crisis conditions are accounted for, with storage levels emerging as a key factor in mitigating extreme price risks. Overall, our results suggest that the German natural gas market, despite facing significant short-term shocks, does not exhibit a long-term trend toward fatter tails in its price distributions.
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