Competition, prices, and efficiency in the deregulated gas pipeline network: A multivariate cointegration analysis
Natural gas pipeline deregulation occurred de facto in 1985 when pipelines were allowed to become open access transporters. Prior to open access, natural gas pipelines functioned as merchant carriers that were required to bundle together gas and its transportation. Under the new system of open access, pipelines carry gas for their customers as contract carriers. Contract carriage gave pipeline customers direct access to transportation and created a connected pipeline grid. Open access enabled pipeline customers and natural gas brokers to exchange and combine transportation rights. By exchanging and combining transmission rights on several connecting pipelines, gas buyers and sellers were able to create connected topologies over which they could trade natural gas. This research has applied multivariate cointegration analysis to data from the natural gas industry to quantify the degree of competition in the open access pipeline network. The empirical results indicate that within and between production markets there is a high degree of competition, which implies allocative efficiency across production field markets. It is clear that deregulation has linked together numerous geographically dispersed spot markets and that open transportation satisfied the conditions necessary for gas traders to exploit price differentials across the pipeline network. This has led to an efficient allocation of gas across the production markets. New policies should aim to remove the remaining restrictions on open access transportation, especially in the city-gate markets.
- OSTI ID:
- 229903
- Journal Information:
- Journal of Energy and Development, Journal Name: Journal of Energy and Development Journal Issue: 1 Vol. 19; ISSN 0361-4476; ISSN JENDD2
- Country of Publication:
- United States
- Language:
- English
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