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Price Discrimination and Limits to Arbitrage in Global LNG Markets

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  • Robert Ritz

Abstract

Gas prices around the world va’y widely despite being connected by international trade of LNG Some industry observers argue hat major exporters g , Qatar) have acted irrationally by failing to engage in price arbitrage. This is also difficult to reconcile with a perfectly competitive model in which price differences exist solely because of transport costs we show that a model with market power can rationalize observed price differentials and trade flows. We highlight how different features of the LNG market limit the ability and/or incentive of other players to arbitrage, and discuss the potential impact of US LNG exports.

Suggested Citation

  • Robert Ritz, 2013. "Price Discrimination and Limits to Arbitrage in Global LNG Markets," Cambridge Working Papers in Economics 1340, Faculty of Economics, University of Cambridge.
  • Handle: RePEc:cam:camdae:1340
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    More about this item

    Keywords

    International trade; limits to arbitrage; LNG pricing; market power; natural gas; price discrimination;

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities

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