EconPapers    
Economics at your fingertips  
 

Market power analysis for oil pipelines facing excess demand

David W. Savitski

Energy Economics, 2012, vol. 34, issue 4, 955-960

Abstract: The Federal Energy Regulatory Commission may grant market-based rates to oil pipelines in the U.S. upon a showing that they lack market power. The Commission defines market power as the ability to profitably increase price above the competitive level for a significant period. Because comparing tariffs alone is generally meaningless for identifying good transportation alternatives, the Commission tends to rely on netback price and delivered price analyses to evaluate market power. When the applicant's tariff is a poor proxy for the competitive tariff, as evidenced by significant excess demand, using the tariff biases the analysis in favor of finding market power, a reverse cellophane trap. Estimating the competitive tariff to avoid this bias is complicated by the spatial aspect of transportation. This paper suggests several ways to estimate the competitive tariff based on netback and delivered prices, or based on estimated cost, and provides an example.

Keywords: Antitrust; Market definition; Oil pipelines; Regulation (search for similar items in EconPapers)
JEL-codes: L43 L51 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0140988311001137
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:34:y:2012:i:4:p:955-960

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2018-05-29
Handle: RePEc:eee:eneeco:v:34:y:2012:i:4:p:955-960