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Gas Storage and Security of Supply in the Medium Run

  • Chaton, Corinne
  • Creti, Anna
  • Villeneuve, Bertrand

This paper analyzes the role of private storage in a market for a commodity (e.g. natural gas) whose supply is subject to the threat of an irreversible disruption. We focus on the medium term in which seasonality of demand and exhaustibility can be neglected. We characterize the price and inventory dynamics (accumulation, drainage and limit stocks) in a competitive equilibrium with rational expectations . We show the robustness of our results to alternative scenarios in which either adisruption has finite duration or the crisis is foreseen. During the crisis consumers may put pressure on the Government to intervene, but too severe antispeculative measures would inefficiently discourage storage. Practical solutions to this dilemma cause welfare losses that we characterize and quantify.

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Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/4808.

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Date of creation: 2009
Date of revision:
Publication status: Published in Resource and Energy Economics, 2009, Vol. 31, no. 1. pp. 24-38.Length: 14 pages
Handle: RePEc:dau:papers:123456789/4808
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  1. Hallett, A. J. Hughes, 1984. "Optimal stockpiling in a high-risk commodity market the case of copper," Journal of Economic Dynamics and Control, Elsevier, vol. 8(2), pages 211-238, November.
  2. repec:tpr:qjecon:v:98:y:1983:i:2:p:215-33 is not listed on IDEAS
  3. Williams,Jeffrey C. & Wright,Brian D., 2005. "Storage and Commodity Markets," Cambridge Books, Cambridge University Press, number 9780521023399, October.
  4. Devarajan, Shantayanan & Weiner, Robert J., 1989. "Dynamic policy coordination: Stockpiling for energy security," Journal of Environmental Economics and Management, Elsevier, vol. 16(1), pages 9-22, January.
  5. Machiel Mulder & Gijsbert Zwart, 2006. "Market failures and government policies in gas markets," CPB Memorandum 143, CPB Netherlands Bureau for Economic Policy Analysis.
  6. Sweeney, James L, 1977. "Economics of Depletable Resources: Market Forces and Intertemporal Bias," Review of Economic Studies, Wiley Blackwell, vol. 44(1), pages 125-41, February.
  7. Stern, Jonathan, 2004. "UK gas security: time to get serious," Energy Policy, Elsevier, vol. 32(17), pages 1967-1979, November.
  8. Grossman, Gene & Helpman, Elhanan, 1993. "Protection for Sale," CEPR Discussion Papers 827, C.E.P.R. Discussion Papers.
  9. Creti, Anna & Villeneuve, Bertrand, 2008. "Equilibrium Storage in a Markov Economy," MPRA Paper 11944, University Library of Munich, Germany.
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