Understanding the Lack of Competition in Natural Gas Markets: The Impact of Storage Ownership and Upstream Competition
AbstractMotivated by the failure of competition to emerge after the natural gas market in the Czech Republic was liberalized, I explore the impact of natural gas storage ownership and upstream competition on the downstream level. I extend standard Cournot models to understand current and likely future developments, paying particular attention to the impact of market liberalization on a country characterized by a lack of domestic production, limited foreign upstream competition, and highly concentrated (and bundled) control over an essential input in the production of the final product: gas storage. I show that the upstream producer may practice his market power to capture some of the benefits of liberalization and increase the wholesale price, which hinders the desired decline of the end-user price in the long run. This pricing change in turn makes the entry of new players in the transition period more difficult. I furthermore analyze three prominent storage structure scenarios and conclude that higher consumer welfare can be reached only in the case of regulated storage access.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by The Center for Economic Research and Graduate Education - Economic Institute, Prague in its series CERGE-EI Working Papers with number wp342.
Date of creation: Sep 2007
Date of revision:
Contact details of provider:
Postal: P.O. Box 882, Politickych veznu 7, 111 21 Praha 1
Phone: (+420) 224 005 123
Fax: (+420) 224 005 333
Web page: http://www.cerge-ei.cz
More information through EDIRC
Natural gas; liberalization; deregulation; successive oligopoly; monopoly; Czech Republic; gas storage.;
Find related papers by JEL classification:
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-11-10 (All new papers)
- NEP-COM-2007-11-10 (Industrial Competition)
- NEP-CSE-2007-11-10 (Economics of Strategic Management)
- NEP-ENE-2007-11-10 (Energy Economics)
- NEP-IND-2007-11-10 (Industrial Organization)
- NEP-MIC-2007-11-10 (Microeconomics)
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.:
- Franziska Holz & Christian von Hirschhausen & Claudia Kemfert, 2006.
"A Strategic Model of European Gas Supply (GASMOD),"
Discussion Papers of DIW Berlin
551, DIW Berlin, German Institute for Economic Research.
- Golombec, R. & Gjelsvik, E. & Knut, E. & Rosendahl, E., 1996.
"Increased Competition on the Supply Side on the Western European Natural Gas Merket,"
Memorandum, Oslo University, Department of Economics
11/1996, Oslo University, Department of Economics.
- Rolf Golombek & Eystein Gjelsvik & Knut Einar Rosendahl, 1998. "Increased Competition on the Supply Side of the Western European Natural Gas Market," The Energy Journal, International Association for Energy Economics, International Association for Energy Economics, vol. 0(Number 3), pages 1-18.
- Rolf Golombek & Eystein Gjelsvik & Knut Einar Rosendahl, 1995. "Effects of Liberalizing the Natural Gas Markets in Western Europe," The Energy Journal, International Association for Energy Economics, International Association for Energy Economics, vol. 0(Number 1), pages 85-112.
- Nese, Gjermund & Straume, Odd Rune, 2004.
"Industry concentration and strategic trade policy in successive oligopoly,"
Working Papers in Economics, University of Bergen, Department of Economics
10/04, University of Bergen, Department of Economics.
- Gjermund Nese & Odd Straume, 2007. "Industry Concentration and Strategic Trade Policy in Successive Oligopoly," Journal of Industry, Competition and Trade, Springer, Springer, vol. 7(1), pages 31-52, March.
- Gjermund Nese & Odd Rune Straume, 2005. "Industry Concentration and Strategic Trade Policy in Successive Oligopoly," CESifo Working Paper Series 1439, CESifo Group Munich.
- Greenhut, M L & Ohta, H, 1979. "Vertical Integration of Successive Oligopolists," American Economic Review, American Economic Association, American Economic Association, vol. 69(1), pages 137-41, March.
- AfDB AfDB, . "AfDB Group Annual Report 2004," Annual Report, African Development Bank, African Development Bank, number 60 edited by Koua Louis Kouakou, 9.
- Egging, Rudolf G. & Gabriel, Steven A., 2006. "Examining market power in the European natural gas market," Energy Policy, Elsevier, Elsevier, vol. 34(17), pages 2762-2778, November.
- Maroeska G. Boots, Fieke A.M. Rijkers and Benjamin F. Hobbs, 2004. "Trading in the Downstream European Gas Market: A Successive Oligopoly Approach," The Energy Journal, International Association for Energy Economics, International Association for Energy Economics, vol. 0(Number 3), pages 73-102.
- Silvester van Koten, 2006. "Bidding Behavior when One Bidder and the Auctioneer Are Vertically Integrated Implications for the Partial Deregulation of EU Electricity Markets," CERGE-EI Working Papers, The Center for Economic Research and Graduate Education - Economic Institute, Prague wp313, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
- Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262200716, December.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jana Koudelkova).
If references are entirely missing, you can add them using this form.