Measuring the effects of natural gas pipeline constraints on regional pricing and market integration

Roger Avalos, Timothy Fitzgerald and Randal R. Rucker

Energy Economics, 2016, vol. 60, issue C, 217-231

Abstract: Natural gas pipeline capacity sets physical limits on the quantity of gas that can be moved between regions, with attendant price effects. We find support for the hypothesis of integrated regional markets. Using data on daily pipeline flows and capacities in Florida and Southern California, we estimate reduced-form price effects of capacity constraints. We find that pipeline congestion increased realized citygate prices by at least 11% over the mean in Florida and by 6% over the mean in Southern California. We attribute the difference in price effects to more binding capacity constraints in the Florida pipeline network. Our estimates provide guidance for interstate pipeline investments.

Keywords: Natural gas; Pipelines; Market integration; Pipeline congestion (search for similar items in EconPapers)
JEL-codes: L95 Q40 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:60:y:2016:i:c:p:217-231

DOI: 10.1016/j.eneco.2016.09.017

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