An econometric study

The originality of the study is to show that history has a part of limit is predicting the future demand for gas.

The starting point is to highlight the implications of British experience regarding the gas market liberalisation. The next step is to show that The European gas market is in process of profound change towards liberalisation influenced by the positive outcome of the British experience and concretised by the adoption of the Gas Directive by the European commission. As a result, Continental Europe is expected to enter an experience similar to the one of the UK.

The study will use data from the UK gas market to show the effect of liberalisation experience on modelling the demand for gas and eventually prove that the use of historical data to predict the future demand for gas is limited.

The first step of the study is to build a gas demand model using multiple regression analysis and find out the best model that fits the data, using the selection process of the "General-to-specific modelling approach. Once the best model is selected, different diagnostic tests are applied to check its predictive accuracy.

It is expected from such study that such model (although it is the best) has no predictive power due to the break in the gas industry structure.

The final step is to correct the predictive performance of the model by including dummy variables or other relevant variables able to capture the effect of the structural break.

* the study is carried out on three major gas segment namely, Domestic, industry and power generation.