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A Dynamic Simulation of Market Power in the Liberalised European Natural Gas Market

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  • Wietze Lise and Benjamin F. Hobbs

Abstract

Recent increases in the world price of oil have led to higher gas prices in Europe, possibly leading to greater opportunities for exercising market power. The effect of different gas producer strategies upon price levels in the liberalised European gas market over the period 2005-2030 is analysed using a dynamic gas market model that accounts for demand, supply, and investments in pipeline transport, LNG, and storage. The multi-period model formulation allows exploration of the dynamics of market power as transportation and storage capacities are augmented and interact with demand growth. The combined effects of spatial configuration of the supply network and supplier location upon intensity of competition in ten different regions in Europe are considered. Differences in prices are due to the interaction of (1) inherent ability of producers to exercise market power (determined by production capacity and costs) with the (2) accessibility of the market (determined by gas transport infrastructure).

Suggested Citation

  • Wietze Lise and Benjamin F. Hobbs, 2009. "A Dynamic Simulation of Market Power in the Liberalised European Natural Gas Market," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 119-136.
  • Handle: RePEc:aen:journl:hh-se-a08
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    References listed on IDEAS

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    Cited by:

    1. Ibrahim Abada, 2012. "A stochastic generalized Nash-Cournot model for the northwestern European natural gas markets with a fuel substitution demand function: The S-GaMMES model," Working Papers 1202, Chaire Economie du climat.
    2. Feijoo, Felipe & Huppmann, Daniel & Sakiyama, Larissa & Siddiqui, Sauleh, 2016. "North American natural gas model: Impact of cross-border trade with Mexico," Energy, Elsevier, vol. 112(C), pages 1084-1095.
    3. Gabriel, S.A. & Rosendahl, K.E. & Egging, Ruud & Avetisyan, H.G. & Siddiqui, S., 2012. "Cartelization in gas markets: Studying the potential for a “Gas OPEC”," Energy Economics, Elsevier, vol. 34(1), pages 137-152.
    4. Levi Marks & Charles F. Mason & Kristina Mohlin & Matthew Zaragoza-Watkins, 2017. "Vertical Market Power in Interconnected Natural Gas and Electricity Markets," CESifo Working Paper Series 6687, CESifo Group Munich.
    5. Ritz, Robert A., 2014. "Price discrimination and limits to arbitrage: An analysis of global LNG markets," Energy Economics, Elsevier, vol. 45(C), pages 324-332.
    6. Robert Ritz, 2013. "Price Discrimination and Limits to Arbitrage in Global LNG Markets," Cambridge Working Papers in Economics 1340, Faculty of Economics, University of Cambridge.
    7. Ibrahim Abada & Steven Gabriel & Vincent Briat & Olivier Massol, 2013. "A Generalized Nash–Cournot Model for the Northwestern European Natural Gas Markets with a Fuel Substitution Demand Function: The GaMMES Model," Networks and Spatial Economics, Springer, vol. 13(1), pages 1-42, March.
    8. repec:eco:journ2:2017-03-31 is not listed on IDEAS
    9. Ibrahim Abada & Pierre-André Jouvet, 2013. "A stochastic generalized Nash-Cournot model for the northwestern European natural gas markets: The S-GaMMES model," Working Papers 1308, Chaire Economie du climat.
    10. Ibrahim Abada, 2012. "Study of the evolution of the northwestern European natural gas markets using S-GaMMES," Working Papers 1203, Chaire Economie du climat.

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    JEL classification:

    • F0 - International Economics - - General

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