Natural gas deregulation in the United States: How will it affect agriculture?

Abstract

This paper examines the implications of three policies of federal deregulation of natural gas prices on the macroeconomy, fertilizer prices, and agriculture for the 1983–1990 period. The three policies are in phase-in of price decontrol (modified NGPA), 2-year freeze on gas prices (price freeze) and accelerated decontrol of wellhead gas prices (early decontrol). Gas price increases affect domestic ammonia producers by raising the cost of producing ammonia. However, even relatively large gas price increases have only a small impact on fertilizer prices and the costs of agricultural production because only an estimated 20% of the increase in natural gas prices is passed through to fertilizer prices, assuming no restrictions on fertilizer imports.