A Dynamic Simulation of Market Power in the Liberalised European Natural Gas Market

Wietze Lise and Benjamin F. Hobbs

The Energy Journal, 2009, vol. 30, issue 1_suppl, 119-136

Abstract: Recent increases in the world price of oil have led to higher gas prices in Europe, possibly leading to greater opportunities for exercising market power. The effect of different gas producer strategies upon price levels in the liberalised European gas market over the period 2005-2030 is analysed using a dynamic gas market model that accounts for demand, supply, and investments in pipeline transport, LNG, and storage. The multi-period model formulation allows exploration of the dynamics of market power as transportation and storage capacities are augmented and interact with demand growth. The combined effects of spatial configuration of the supply network and supplier location upon intensity of competition in ten different regions in Europe are considered. Differences in prices are due to the interaction of (1) inherent ability of producers to exercise market power (determined by production capacity and costs) with the (2) accessibility of the market (determined by gas transport infrastructure).

Keywords: Natural gas; EU; pipelines; market power; GASTALE model (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:sae:enejou:v:30:y:2009:i:1_suppl:p:119-136

DOI: 10.5547/ISSN0195-6574-EJ-Vol30-NoSI-8

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