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European natural gas markets: resource constraints and market power

Author

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  • Gijsbert Zwart

    (CPB Netherlands Bureau for Economic Policy Analysis)

Abstract

We analyze long-run scenarios for the European natural gas markets in a model, NATGAS, that explicitly includes both resource constraints and producers’ market power. Europa wordt geconfronteerd met afnemende eigen aardgasvoorraden, met name in de van oudsher grote producenten het Verenigd Koninkrijk en Nederland. De Europese afhankelijkheid van een beperkt aantal grote aardgasleveranciers zal toenemen. Daarmee groeit ook de marktmacht van deze producerende landen. We bekijken de invloed van de beschikbaarheid van vloeibaar aardgas, LNG, op de marktaandelen van producenten en de snelheid van uitputting van Europese voorraden. We bestuderen in het bijzonder hoe in de verschilende scenario's de schaduwprijzen van eindige voorraden de productiebeslissingen beïnvloeden. The European natural gas market is characterized by declining indigenous resources, particularly in the UK and the Netherlands, and a growing dependence on a small number of large exporters who, as a consequence, see their market power increasing. We analyze the impact of conditions on the global LNG market on market shares of pipeline gas suppliers, as well as on the speed of depletion of indigenous European resources. We focus on how shadow prices of resource constraints affect substitution patterns in the various scenarios.

Suggested Citation

  • Gijsbert Zwart, 2008. "European natural gas markets: resource constraints and market power," CPB Discussion Paper 116, CPB Netherlands Bureau for Economic Policy Analysis.
    • Handle: RePEc:cpb:discus:116
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    References listed on IDEAS

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    1. Stiglitz, Joseph E, 1976. "Monopoly and the Rate of Extraction of Exhaustible Resources," American Economic Review, American Economic Association, vol. 66(4), pages 655-661, September.
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    Cited by:

    1. Rinaldo Brau & Raffaele Doronzo & Carlo V. Fiorio & Massimo Florio, 2010. "EU Gas Industry Reforms and Consumers' Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 167-182.
    2. van Goor, Harm & Scholtens, Bert, 2014. "Modeling natural gas price volatility: The case of the UK gas market," Energy, Elsevier, vol. 72(C), pages 126-134.
    3. Kristine Grimsrud, Knut Einar Rosendahl, Halvor B. Storrøsten, and Marina Tsygankova, 2016. "Short Run Effects of Bleaker Prospects for Oligopolistic Producers of a Non-renewable Resource," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    4. repec:aen:journl:ej37-si3-kiss is not listed on IDEAS
    5. Egging, Ruud & Holz, Franziska & Gabriel, Steven A., 2010. "The World Gas Model," Energy, Elsevier, vol. 35(10), pages 4016-4029.

    More about this item

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices

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