IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/54115.html
   My bibliography  Save this paper

Implications Of The Elasticity Of Natural Gas In Mexico On Investment In Gas Pipelines And In Setting The Arbitrage Point

Author

Listed:
  • Brito, Dagobert
  • Rosellon, Juan

Abstract

We address the optimal timing of investment in gas pipelines when the demand for gas is stochastic. We will show that this is a problem that can be solved in theory, but the practical solution depends on functions and parameters that are either subjective or cannot be estimated. We will then reformulate the problem in a manner that can Pareto rank investment strategies. These strategies can be implemented with reasonably straightforward policies. The demand for gas is very inelastic and thus the welfare losses associated from small deviations from a first best optimum are minimal. This implies that the gas pipeline system can be regulated with a relatively simple set of rules without any significant loss of welfare. Regulation of the gas pipeline system can be transparent and a result may be a good candidate for some institutional arrangement in which there is substantial private investment in gas pipelines.

Suggested Citation

  • Brito, Dagobert & Rosellon, Juan, 2004. "Implications Of The Elasticity Of Natural Gas In Mexico On Investment In Gas Pipelines And In Setting The Arbitrage Point," MPRA Paper 54115, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:54115
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/54115/1/MPRA_paper_54115.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Dagobert L. Brito & Juan Rosellon, 2002. "Pricing Natural Gas in Mexico: An Application of the Little-Mirrlees Rule," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 81-93.
    2. Dagobert L. Brito & William Laney Littlejohn & Juan Rosellón, 2000. "Pricing Liquid Petroleum Gas in Mexico," Southern Economic Journal, John Wiley & Sons, vol. 66(3), pages 742-753, January.
    3. Rosellon, Juan*Halpern, Jonathan, 2001. "Regulatory reform in Mexico's natural gas industry : liberalization in the context of a dominant upstream incumbent," Policy Research Working Paper Series 2537, The World Bank.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Guerrero, Daniel & Rosellon, Juan, 2017. "Planeación Óptima de la Red de Transmisión Eléctrica de Baja California Sur [Optimal Planning of the Electricity Transmission Grid of Southern Baja California (Mexico)]," MPRA Paper 83708, University Library of Munich, Germany.
    2. Dagobert Brito & Juan Rosellón, 2011. "Lumpy Investment in Regulated Natural Gas Pipelines: An Application of the Theory of the Second Best," Networks and Spatial Economics, Springer, vol. 11(3), pages 533-553, September.
    3. Rosellon, Juan, 2008. "Policy Research Supporting Policy Making: The CIDE-CRE Agreement," MPRA Paper 22419, University Library of Munich, Germany.
    4. Marina Tsygankova, 2008. "Netback pricing as a remedy for the Russian gas deficit," Discussion Papers 554, Statistics Norway, Research Department.
    5. Ramirez, Jose Carlos & Rosellon, Juan, 2002. "Pricing natural gas distribution in Mexico," Energy Economics, Elsevier, vol. 24(3), pages 231-248, May.
    6. Víctor Gerardo Carreón Rodríguez & Juan Rosellón, 2012. "Oil and Gas in Mexico," Working papers DTE 540, CIDE, División de Economía.
    7. Asquer, Alberto, 2011. "Liberalization and regulatory reform of network industries: A comparative analysis of Italian public utilities," Utilities Policy, Elsevier, vol. 19(3), pages 172-184.
    8. Gabriele, Alberto, 2004. "Policy alternatives in reforming energy utilities in developing countries," Energy Policy, Elsevier, vol. 32(11), pages 1319-1337, July.
    9. Brito, Dagobert & Rosellón, Juan, 2002. "Timing of Investment in LPG Pipelines in Mexico," MPRA Paper 54116, University Library of Munich, Germany.

    More about this item

    Keywords

    Price Regulation; Natural Gas; Mexico; Gas Pipelines.;
    All these keywords.

    JEL classification:

    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:54115. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.