IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

Alternative Regulatory Policies for Dealing with the Natural Gas Shortage

  • Paul W. MacAvoy
  • Robert S. Pindyck

Low wellhead ceiling prices over the past decade have led to the beginning of a shortage in natural gas production. If the demand for gas grows as expected during the 1970s, and if ceiling prices remain low as a result of restrictive regulatory policy, this shortage could grow significantly. This paper examines the effects of this and alternative regulatory policies on gas reserves, production supply, production demand, and prices over the remainder of this decade. An econometric model is developed to explain the gas discovery process, reserve accumulation, production out of reserves, pipeline price markup and wholesale demand for production on a disaggregated basis. By simulating this model under alternative policy assumptions, we find that the gas shortage can be ameliorated (and after four or five years, eliminated) through phased deregulation of wellhead sales, along the lines proposed in President Nixon's April 1973 Energy Message. But the shortage is not reduced by changes in regulatory rulings on prices, even when the rulings allow price increases that are the maximum likely to be acceptable to the Courts. These results are rather insensitive to alternative forecasts of such exogenous variables as GNP growth, population growth, and changes in the prices of alternate fuels.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
File Function: full text
Download Restriction: Access to full text is restricted to JSTOR subscribers. See for details.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by The RAND Corporation in its journal Bell Journal of Economics.

Volume (Year): 4 (1973)
Issue (Month): 2 (Autumn)
Pages: 454-498

in new window

Handle: RePEc:rje:bellje:v:4:y:1973:i:autumn:p:454-498
Contact details of provider: Web page:

Order Information: Web:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. MacAvoy, Paul W, 1971. "The Regulation-Induced Shortage of Natural Gas," Journal of Law and Economics, University of Chicago Press, vol. 14(1), pages 167-99, April.
  2. Westfield, Fred M, 1971. "Methodology of Evaluating Economic Regulation," American Economic Review, American Economic Association, vol. 61(2), pages 211-17, May.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:rje:bellje:v:4:y:1973:i:autumn:p:454-498. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.