Evaluating the Economic Cost of Strategic Storage of Natural Gas
AbstractThe European Commission wants to implement a single market for gas. One of the components of this market is a regulated provision for "security of supply" which consists of rules for the implementation and use of a given reserve stock of gas. We investigate the impact of this policy on the profitability of a storage operator, using data from Denmark and Italy. Keeping storage capacity constant, the costs of the strategic stock are around 20% of the value of the storage market for Denmark, and 16% for Italy. This cost is due to the inability to extract arbitrage profits from the captive stock.
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Bibliographic InfoPaper provided by University of Essex, Department of Economics in its series Economics Discussion Papers with number 658.
Date of creation: 31 Jul 2008
Date of revision:
Postal: Discussion Papers Administrator, Department of Economics, University of Essex, Wivenhoe Park, Colchester CO4 3SQ, U.K.
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-08-14 (All new papers)
- NEP-EEC-2008-08-14 (European Economics)
- NEP-ENE-2008-08-14 (Energy Economics)
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- George J. Hall & John Rust, 1999.
"An Empirical Model of Inventory Investment by Durable Commodity Intermediaries,"
Cowles Foundation Discussion Papers
1228, Cowles Foundation for Research in Economics, Yale University.
- Hall, George & Rust, John, 2000. "An empirical model of inventory investment by durable commodity intermediaries," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 52(1), pages 171-214, June.
- George Hall & John Rust, 1999. "An Empirical Model of Inventory Investment by Durable Commodity Intermediaries," Macroeconomics 9904005, EconWPA.
- Wright, Brian D & Williams, Jeffrey C, 1982. "The Economic Role of Commodity Storage," Economic Journal, Royal Economic Society, vol. 92(367), pages 596-614, September.
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