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Storage and security of supply in the medium run

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Author Info
Chaton, Corinne
Creti, Anna
Villeneuve, Bertrand

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Abstract

This paper analyzes the role of private storage in a market for a commodity (e.g. natural gas) whose supply is subject to the threat of an irreversible disruption. We focus on the medium term in which seasonality of demand and exhaustibility can be neglected. We characterize the price and inventory dynamics (accumulation, drainage and limit stocks) in a competitive equilibrium with rational expectations. We show the robustness of our results to alternative scenarios in which either a disruption has finite duration or the crisis is foreseen. During the crisis consumers may put pressure on the Government to intervene, but too severe antispeculative measures would inefficiently discourage storage. Practical solutions to this dilemma cause welfare losses that we characterize and quantify.

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Publisher Info
Article provided by Elsevier in its journal Resource and Energy Economics.

Volume (Year): 31 (2009)
Issue (Month): 1 (January)
Pages: 24-38
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Handle: RePEc:eee:resene:v:31:y:2009:i:1:p:24-38

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Web page: http://www.elsevier.com/locate/inca/505569

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Keywords: Gas industry Storage Dynamic models;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Tolley, George S & Wilman, John D, 1977. "The Foreign Dependence Question," Journal of Political Economy, University of Chicago Press, vol. 85(2), pages 323-47, April. [Downloadable!] (restricted)
  2. Hillman, Arye L & Long, Ngo Van, 1983. "Pricing and Depletion of an Exhaustible Resource When There Is Anticipation of Trade Disruption," The Quarterly Journal of Economics, MIT Press, vol. 98(2), pages 215-33, May. [Downloadable!] (restricted)
  3. Sweeney, James L, 1977. "Economics of Depletable Resources: Market Forces and Intertemporal Bias," Review of Economic Studies, Blackwell Publishing, vol. 44(1), pages 125-41, February. [Downloadable!] (restricted)
  4. Albert L. Nichols & Richard J. Zeckhauser, 1977. "Stockpiling Strategies and Cartel Prices," Bell Journal of Economics, The RAND Corporation, vol. 8(1), pages 66-96, Spring. [Downloadable!] (restricted)
  5. Devarajan, Shantayanan & Weiner, Robert J., 1989. "Dynamic policy coordination: Stockpiling for energy security," Journal of Environmental Economics and Management, Elsevier, vol. 16(1), pages 9-22, January. [Downloadable!] (restricted)
  6. Hallett, A. J. Hughes, 1984. "Optimal stockpiling in a high-risk commodity market the case of copper," Journal of Economic Dynamics and Control, Elsevier, vol. 8(2), pages 211-238, November. [Downloadable!] (restricted)
  7. Bergstrom, Clas & Loury, Glenn C & Persson, Mats, 1985. "Embargo Threats and the Management of Emergency Reserves," Journal of Political Economy, University of Chicago Press, vol. 93(1), pages 26-42, February. [Downloadable!] (restricted)
  8. Brian D. Wright & Jeffrey C. Williams, 1982. "The Roles of Public and Private Storage in Managing Oil Import Disruptions," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 341-353, Autumn. [Downloadable!] (restricted)
  9. Machiel Mulder & Gijsbert Zwart, 2006. "Market failures and government policies in gas markets," CPB Memoranda 143, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
  10. William W. Hogan, 1983. "Oil Stockpiling: Help Thy Neighbor," The Energy Journal, International Association for Energy Economics, vol. 4(3), pages 49-72.
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Cited by:
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  1. Joao Miguel Ejarque, 2008. "Evaluating the Economic Cost of Strategic Storage of Natural Gas," Economics Discussion Papers 658, University of Essex, Department of Economics. [Downloadable!]
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