IDEAS home Printed from
   My bibliography  Save this paper

"When Barriers to Markets Fall: Pipeline Deregulation, Spot Markets, and the Topology of the Natural Gas Market"


  • De vany, A.
  • Walls, W.D.


Until 184, Federal regulation sanctioned monopoly as the primary mechanism for distributing natural gas. Pipelines were granted protected markets and permitted to acquire and distribute gas only through long-term contracts. To buy or sell gas, users and producers had to deal with the pipeline, they could not deal directly. Gas markets failed to exit. In 1985, pipelines were given the option to become "open access" pipelines who transported gas. This change dissolved the barriers to markets and, for the first time in more than fifty years, authorized competition. In this paper, we observe and evaluate the emergence, evolution and performance of natural gas spot markets in this new environment. We discover that spot markets flourished in the absence of regulatory barriers to their existence; more than fifty spot markets came into existence and quickly replaced long-term contracts and pipelines as sources gas. The spot price evidence reveals that open access changed the topology of the pipeline network: the balkanized and disconnected network of gas markets created by regulation became more strongly connected and spot prices converged and became more correlated throughout the network. By the end of our sample period, gas markets had become liquid and informationally efficient -- demand or supply shocks are strongly damped across the network, and the price at any point contains all the information in the network. The spatially separated spot markets are now so strongly connected that they form a single national market for natural gas.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • De vany, A. & Walls, W.D., 1992. ""When Barriers to Markets Fall: Pipeline Deregulation, Spot Markets, and the Topology of the Natural Gas Market"," Papers 90-92-28, California Irvine - School of Social Sciences.
  • Handle: RePEc:fth:calirv:90-92-28

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    1. Ahsan, Syed M., 1989. "Choice of tax base under uncertainty : Consumption or income?," Journal of Public Economics, Elsevier, vol. 40(1), pages 99-134, October.
    2. Sandmo, Agnar, 1989. "Differential taxation and the encouragement of risk-taking," Economics Letters, Elsevier, vol. 31(1), pages 55-59.
    3. Feldstein, Martin S, 1969. "The Effects on Taxation on Risk Taking," Journal of Political Economy, University of Chicago Press, vol. 77(5), pages 755-764, Sept./Oct.
    4. J. E. Stiglitz, 1969. "The Effects of Income, Wealth, and Capital Gains Taxation on Risk-Taking," The Quarterly Journal of Economics, Oxford University Press, vol. 83(2), pages 263-283.
    5. Evsey D. Domar & Richard A. Musgrave, 1944. "Proportional Income Taxation and Risk-Taking," The Quarterly Journal of Economics, Oxford University Press, vol. 58(3), pages 388-422.
    6. Bulow, Jeremy I & Summers, Lawrence H, 1984. "The Taxation of Risky Assets," Journal of Political Economy, University of Chicago Press, vol. 92(1), pages 20-39, February.
    7. Roger H. Gordon, 1985. "Taxation of Corporate Capital Income: Tax Revenues Versus Tax Distortions," The Quarterly Journal of Economics, Oxford University Press, vol. 100(1), pages 1-27.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Arthur De Vany & W. David Walls, 1994. "Open Access And The Emergence Of A Competitive Natural Gas Market," Contemporary Economic Policy, Western Economic Association International, vol. 12(2), pages 77-96, April.

    More about this item


    deregulation ; natural gas;


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fth:calirv:90-92-28. 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: (Thomas Krichel). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.