Transport costs and the spatial distribution of natural gas prices

Technical Report · Sat Oct 01 04:00:00 EDT 1983

OSTI ID:6431041

Montgomery, W D; Gottlieb, M

Costs of transporting and distributing gas vary across regions and customer classes. The purpose of this paper is to analyze how these costs affect the distribution of gas prices in market equilibrium, the relation between gas prices and prices of competing fuels, and the price of gas in the field. It is assumed throughout the paper that (1) uniform field prices prevail and (2) in some markets the price of gas to industrial consumers is determined by competition with residual fuel oil. In order to link delivered industrial prices with field prices, it is also necessary to make some assumption about how other customer classes are treated. If it is assumed that there is no cross-subsidization among customer classes, the following conclusions are reached: field prices would equal the Btu equivalent of the price of fuel oil less transportation costs to the market in which gas and oil compete on the margin; in more distant markets with higher transportation costs gas would be more expensive than residual fuel oil, and industrial customers able to switch easily from gas to oil would do so; in markets closer to the field, with lower transportation costs gas would be less expensive than residual fuel oil, and residual fuel oil would not be used by any consumers capable of burning gas; sales-weighted average prices charged industrial customers would be less than the Btu equivalent of residual fuel oil. 2 references, 9 figures, 7 tables.

• Research Organization: Resources for the Future, Inc., Washington, DC (USA)
• DOE Contract Number: AC01-80PE70267
• OSTI ID: 6431041
• Report Number(s): DOE/PE/70267-T5; ON: DE85001583
• Country of Publication: United States
• Language: English

Related Subjects

03 NATURAL GAS
030600* -- Natural Gas-- Economic
Industrial
& Business Aspects
29 ENERGY PLANNING, POLICY, AND ECONOMY
290200 -- Energy Planning & Policy-- Economics & Sociology
294003 -- Energy Planning & Policy-- Natural Gas
COST
DATA
ENERGY SOURCES
FINANCIAL DATA
FLUIDS
FOSSIL FUELS
FUEL GAS
FUELS
GAS FUELS
GASES
INFORMATION
NATURAL GAS
PRICES
REGIONAL ANALYSIS
SECTORAL ANALYSIS
TRANSPORT