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Optimal Price of Natural Gas in IRAN Energy Market: A Computable General Equilibrium Model

Author

Listed:
  • Jahangard, Esfandiar

    (Associate Professor of Economics, Allame Tabatabaei University)

  • Faridzad, Ali

    (Associate Professor of Economics, Allame Tabatabaei University)

  • Mosavi, Mir Hossein

    (Associate Professor of Economics, Alzahra University)

  • Matin, Saeed

    (Ph.D Student of Economics, Allame Tabatabaei University)

Abstract

The purpose of this paper is to find the ratio of the domestic price of natural gas to the export price that maximizes the welfare function of households. To achieve this goal, The administrative regulation of domestic gas prices is explicitly modelled in CGE Model. Regional gas markets can be characterised as being imperfectly competitive, so strategic behavior in a regional gas market modelled Cournot oligopoly structure. The database in this paper is the Social Accounting Matrix (SAM) of Iran 2013, which was prepared by the Majlis Research Center. The results show that the increase in the price of domestic natural gas under certain assumptions increases the level of economic efficiency and export demand function with a higher elasticity create a higher welfare level. Finally The optimal domestic gas price should be approximately 45% of the export price which is a lower ratio compared to the proposed ratio of 65% in the Law of the Fifth Development Plan of IRAN

Suggested Citation

  • Jahangard, Esfandiar & Faridzad, Ali & Mosavi, Mir Hossein & Matin, Saeed, 2023. "Optimal Price of Natural Gas in IRAN Energy Market: A Computable General Equilibrium Model," Quarterly Journal of Applied Theories of Economics, Faculty of Economics, Management and Business, University of Tabriz, vol. 10(3), pages 1-34, December.
    • Handle: RePEc:ris:qjatoe:0314
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    More about this item

    Keywords

    CGE model; administrative price regulation; implicit subsidy; Export Gas Market; oligopoly Market;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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