The triumph of markets in natural gas: Competition, it is argued, is not suitable for pipelines. This diagnosis is wrong

Journal Article · Sat Apr 15 04:00:00 EDT 1995 · Fortnightly

OSTI ID:115003

De Vany, A ^[1]; Walls, D

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1. Univ. of California, Irvine, CA (United States)

During the last decade, the natural gas industry in the United States has been transformed from a heavily regulated business to one facing competitive markets. This transformation grew out of the failure of regulation; regulators, suppliers, pipelines, and customres all played a part. It continued today as the industry restructures and builds new institutions. A series of regulatory crises forced deregulation in stages; First, wellhead prices; second ,gas contracts; and finally, pipeline transportation. As markets responded, the Federal Energy Regulatory Commission (FERC) and the state regulatory commissions were forced to change. The growing efficiency of markets demanded better access to services. Bypass, that quaint industry term for access to markets, emerged as a goal for gas users and suppliers. Regulators answered with the now-famous series of open access orders permitting shippers to bypass pipelines as sellers of gas and letting pipelines elect to transport gas under contract. By about 1985, enough pipelines had opened up that gas buyers and sellers could deal directly with one another and make arrangements to transport gas with assurance. This development marked the beginning of the modern gas market. By 1989, a mature form of competition had come to natural gas. Enough pipelines had opened their systems to form a pipeline network. Markets had evolved far enough to coordinate gas and transmission trading. The gas market had gained the broad participation of buyers and sellers, giving it the depth and liquidity characteristic of a competitive market. The gas pipeline industry is no longer a natural monopoly.

• OSTI ID: 115003
• Journal Information: Fortnightly, Journal Name: Fortnightly Journal Issue: 8 Vol. 133; ISSN FRTNE8
• Country of Publication: United States
• Language: English

Related Subjects

03 NATURAL GAS
COMPETITION
HISTORICAL ASPECTS
MARKET
NATURAL GAS
PIPELINES
SPOT MARKET