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European Natural Gas Markets: Resource Constraints and Market Power

  • Gijsbert T.J. Zwart

The European natural gas market is characterized by declining indigenous resources, particularly in the UK and the Netherlands, and a growing dependence on a small number of large exporters who, as a consequence, see their market power increasing. In this paper we analyze long-run scenarios for the European natural gas markets in a model, NATGAS, that explicitly includes both factors, resource constraints and producersÕ market power. Finite resources lead to interdependencies of current production decisions and future opportunities. These decisions in turn depend on the potential for large producers to set market prices above marginal costs. We analyze the impact of conditions on the global LNG market on market shares of pipeline gas suppliers, as well as on the speed of depletion of indigenous European resources. We focus on how shadow prices of resource constraints affect substitution patterns in the various scenarios.

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Article provided by International Association for Energy Economics in its journal The Energy Journal.

Volume (Year): Volume 30 (2009)
Issue (Month): Special Issue ()
Pages: 151-166

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Handle: RePEc:aen:journl:hh-se-a10
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  8. Ruud Egging, Franziska Holz, Christian von Hirschhausen and Steven A. Gabriel, 2009. "Representing GASPEC with the World Gas Model," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 97-118.
  9. Egging, Rudolf G. & Gabriel, Steven A., 2006. "Examining market power in the European natural gas market," Energy Policy, Elsevier, vol. 34(17), pages 2762-2778, November.
  10. Stiglitz, Joseph E, 1976. "Monopoly and the Rate of Extraction of Exhaustible Resources," American Economic Review, American Economic Association, vol. 66(4), pages 655-61, September.
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