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North American natural gas and energy markets in transition: insights from global models

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  • Yeh, Sonia
  • Cai, Yiyong
  • Huppman, Daniel
  • Bernstein, Paul
  • Tuladhar, Sugandha
  • Huntington, Hillard G.

Abstract

This modeling comparison exercise looks at the global consequences of increased shale gas production in the U.S. and increased gas demand from Asia. We find that differences in models' theoretical construct and assumptions can lead to divergences in their predictions about the consequences of U.S. shale gas boom. In general, models find that U.S. High Shale Gas scenario leads to increased U.S. production, lower global gas prices, and lower gas production in non-U.S. regions. Gas demand in Asia alone has little effects on U.S. production; but together with the shale gas boom, the U.S. can have a large export advantage. Overall, models find U.S. exports level range from 0.06 to 13.7 trillion cubic feet (TCF) in 2040. The comparison of supply, demand, and price changes in response to shocks reveals important differences among models. First is how the demand shocks were implemented and how the model responds to shocks: static and elastic within each time period vs. endogenous to the long-term gross domestic product (GDP) growth. Second is how the supply response is expressed through fuel/technology substitutions, particularly the flexibility of cross-fuel substitution in the power sector. Identifying these differences is important in understanding the model's insights and policy recommendations.

Suggested Citation

  • Yeh, Sonia & Cai, Yiyong & Huppman, Daniel & Bernstein, Paul & Tuladhar, Sugandha & Huntington, Hillard G., 2016. "North American natural gas and energy markets in transition: insights from global models," Energy Economics, Elsevier, vol. 60(C), pages 405-415.
  • Handle: RePEc:eee:eneeco:v:60:y:2016:i:c:p:405-415
    DOI: 10.1016/j.eneco.2016.08.021
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    References listed on IDEAS

    as
    1. Huntington, Hillard G., 2016. "Introduction: North American natural gas markets in transition," Energy Economics, Elsevier, vol. 60(C), pages 401-404.
    2. Urga, Giovanni & Walters, Chris, 2003. "Dynamic translog and linear logit models: a factor demand analysis of interfuel substitution in US industrial energy demand," Energy Economics, Elsevier, vol. 25(1), pages 1-21, January.
    3. 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.
    4. David I. Stern, 2012. "Interfuel Substitution: A Meta‐Analysis," Journal of Economic Surveys, Wiley Blackwell, vol. 26(2), pages 307-331, April.
    5. Arora, Vipin & Cai, Yiyong & Jones, Ayaka, 2016. "The national and international impacts of coal-to-gas switching in the Chinese power sector," Energy Economics, Elsevier, vol. 60(C), pages 416-426.
    6. Robert Baron, Paul Bernstein, W. David Montgomery, and Sugandha Tuladhar, 2015. "Macroeconomic Impacts of LNG Exports from the United States," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 1).
    7. Huppmann, Daniel & Egging, Ruud, 2014. "Market power, fuel substitution and infrastructure – A large-scale equilibrium model of global energy markets," Energy, Elsevier, vol. 75(C), pages 483-500.
    8. Cai, Yiyong & Newth, David & Finnigan, John & Gunasekera, Don, 2015. "A hybrid energy-economy model for global integrated assessment of climate change, carbon mitigation and energy transformation," Applied Energy, Elsevier, vol. 148(C), pages 381-395.
    9. repec:aen:journl:eeep4_1_montgomery is not listed on IDEAS
    10. Beckman, Jayson & Hertel, Thomas & Tyner, Wallace, 2011. "Validating energy-oriented CGE models," Energy Economics, Elsevier, vol. 33(5), pages 799-806, September.
    11. Cai, Yiyong & Arora, Vipin, 2015. "Disaggregating electricity generation technologies in CGE models: A revised technology bundle approach with an application to the U.S. Clean Power Plan," Applied Energy, Elsevier, vol. 154(C), pages 543-555.
    12. Bernstein, Paul & Tuladhar, Sugandha D. & Yuan, Mei, 2016. "Economics of U.S. natural gas exports: Should regulators limit U.S. LNG exports?," Energy Economics, Elsevier, vol. 60(C), pages 427-437.
    13. Franziska Holz & Philipp M. Richter & Ruud Egging, 2015. "A Global Perspective on the Future of Natural Gas: Resources, Trade, and Climate Constraints," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 9(1), pages 85-106.
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    Cited by:

    1. Bernstein, Paul & Tuladhar, Sugandha D. & Yuan, Mei, 2016. "Economics of U.S. natural gas exports: Should regulators limit U.S. LNG exports?," Energy Economics, Elsevier, vol. 60(C), pages 427-437.
    2. Bistline, John E., 2016. "Energy technology R&D portfolio management: Modeling uncertain returns and market diffusion," Applied Energy, Elsevier, vol. 183(C), pages 1181-1196.

    More about this item

    Keywords

    Shale gas; Energy economic models; Natural gas; Asian gas demand; International gas trade;

    JEL classification:

    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting

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