Productivity Analysis of US Natural Gas Distribution Industry

Abstract

As the result of the deregulation of well-head natural gas markets and the restructuring of the natural gas pipeline industry during the 1980s and 1990s, the natural gas volume and nominal price of supply have varied widely over the industry. In the years before interstate pipelines connected the gas production areas to distant markets, gas was considered so abundant as to be almost worthless. Now competition is well entrenched in gas production and is moving downstream into transportation markets. The provision of natural gas is now separated from the sale of pipeline transportation services, and local distribution services are being increasingly unbundled from the gas commodity sale. This paper measures and argues the productivity growth and change before and after the deregulation in the natural gas distribution industry at an industry level in the US using total factor productivity (TFP) and translog cost function methods. From the results, it is concluded the TFP in industry level has no significant growth rate before and after deregulation.