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An Unsympathetic Lecture on Economic Theory and the Deregulation of Natural Gas

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  • Ferdinand E. Banks

    (Department of Economics, Uppsala University, Sweden)

Abstract

Just as electricity deregulation has failed in many countries or regions, it will eventually fail in many more. The reason is simple, and is generally recognized everywhere: Deregulation increases uncertainty, and uncertainty inevitably depresses physical investment. Any success experienced by electricity or gas deregulation will be exclusively due to the initial presence of excess capacity. Moreover, in Europe, ‘restructuring’ means that a competitive or partially-competitive gas-purchasing structure will find itself confronted by powerful external suppliers. Thus the already high price of gas could go higher, to the detriment of large firms as well as households and small businesses. In the US both Energy Secretary Abraham and the Chairman of the Federal Reserve System (Alan Greenspan) have expressed grave concern about the present development of the natural gas price, which they evidently regard as a threat to the US macroeconomy that is on the same plane as an escalation in oil prices.

Suggested Citation

  • Ferdinand E. Banks, 2005. "An Unsympathetic Lecture on Economic Theory and the Deregulation of Natural Gas," Energy & Environment, , vol. 16(2), pages 303-319, March.
    • Handle: RePEc:sae:engenv:v:16:y:2005:i:2:p:303-319
    DOI: 10.1260/0958305053749552
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    References listed on IDEAS

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