Optimal Price of Natural Gas in IRAN Energy Market: A Computable General Equilibrium Model

Esfandiar Jahangard (), Ali Faridzad (), Mir Hossein Mosavi () and Saeed Matin ()
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Esfandiar Jahangard: Associate Professor of Economics, Allame Tabatabaei University
Ali Faridzad: Associate Professor of Economics, Allame Tabatabaei University
Mir Hossein Mosavi: Associate Professor of Economics, Alzahra University
Saeed Matin: Ph.D Student of Economics, Allame Tabatabaei University

Quarterly Journal of Applied Theories of Economics, 2023, vol. 10, issue 3, 1-34

Abstract: The purpose of this paper is to find the ratio of the domestic price of natural gas to the export price that maximizes the welfare function of households. To achieve this goal, The administrative regulation of domestic gas prices is explicitly modelled in CGE Model. Regional gas markets can be characterised as being imperfectly competitive, so strategic behavior in a regional gas market modelled Cournot oligopoly structure. The database in this paper is the Social Accounting Matrix (SAM) of Iran 2013, which was prepared by the Majlis Research Center. The results show that the increase in the price of domestic natural gas under certain assumptions increases the level of economic efficiency and export demand function with a higher elasticity create a higher welfare level. Finally The optimal domestic gas price should be approximately 45% of the export price which is a lower ratio compared to the proposed ratio of 65% in the Law of the Fifth Development Plan of IRAN

Keywords: CGE model; administrative price regulation; implicit subsidy; Export Gas Market; oligopoly Market (search for similar items in EconPapers)
JEL-codes: C68 D43 H20 (search for similar items in EconPapers)
Date: 2023
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