Natural Gas Price Deregulation Research Articles

An ex-post welfare analysis of natural gas regulation in the industrial sector

The current structure of the US natural gas industry is a result of the evolution of regulatory policy over the past three decades which began with the deregulation of natural gas prices at the wellhead (NGPA of 1978) and culminated with the deregulation of interstate transportation of natural gas (FERC Order 636). Focusing on the industrial sector, this paper estimates the welfare and price effects associated with the changes in regulatory policy. Overtime, actual prices converge towards estimated equilibrium prices. Consequently, deadweight losses diminished. An estimated $15.47 billion (2003 dollars) of welfare loss had been incurred from 1977 to 2000.

Two if by Sea

This article discusses that ever since the Methane Pioneer sailed a cargo of liquefied natural gas from the United States to England in 1959, LNG trading in the United States has been a business of fits and starts. A chart plotting the growth of seaborne LNG depicts a flat first decade in the 1960s, 10 years’ rise in the 1970s during the first oil crunch and a flurry of Japanese activity, and then a plateau again in the 1980s on the tail of natural gas price deregulation and a bump up in domestic natural gas production. Bluewater’s concepts for offshore LNG terminals are designed to let a tanker weathervane. Moored at a single point, a weather vaning vessel swings freely to present the lowest area it can to wind and sea. The practice is common with offshore oil handling to keep ship movement from straining the floating hose that carries crude off the ship.

Canadian Natural Gas Industry An Overview

Abstract The Canadian natural gas industry has undergone a transition from near total government control to a "Free market" system of direct negotiations between buyers and sellers. Complete deregulation of natural gas prices became effective on November 1, 1986; however, partial regulation of market access remains in place. The transition has occurred during a period of significant oversupply in the North American market coupled with dramatically reduced commodity prices for competing energy sources. As a result, there has been severe competition for the markets causing substantial downward pressure on prices to the consumer as well as on the gas sales by the traditional marketers. Introduction This paper provides a brief review of the current Canadian natural gas resource base as well as recent industry activity including the following:Existing supply sourcesDrilling activityHistorical Canadian natural gas salesurrently contracted reservesShut-in reservesSpecific purchaser considerationsTrans Canada Pipelines LimitedAlberta & Southern Gas Co. Ltd.Supply/demand projections. As Alberta accounts for 85% of Canada's conventional natural gas reserves, the detailed discussion will be limited to Alberta's reserves. However, the conclusions drawn are deemed to be applicable to Canada's total conventional natural gas industry. A variety of data sources have been accessed to develop the analysis presented herein, each with varying effective dates. In all cases, the most recent data available from each source has been utilized. Where only partial year data was available, full year values have been estimated by the author. Existing Supply Sources The National Energy Board(l) (NEB) has estimated Canada's remaining established natural gas reserves at December 31, 1985 to be 95 exajoules (2557 109m3 at 37.4 MJ/m3); Table 1 summarizes the NEB reserve estimates by region. The NEB does not currently book any eastcoast offshore reserves due to concern regarding the economic viability of the area. As the frontier reserves currently account for only 18% of Canada's remaining established reserves and production is not forecast by the NEB to commence until the mid-1990s, this analysis will be restricted to the conventional producing areas. Figure 1(2) presents an historical summary of NEB's estimates of Canada's remaining conventional reserves, with 1985 marking the third consecutive year in which new discoveries have failed to replace production. Alberta is the dominant source of conventional natural gas in Canada both in terms of reserves (85%) and production (86%). Therefore, the following discussion of currently available supply will be limited to Alberta. Figure 2 presents Alberta's historical remaining established reserves of marketable natural gas as determined by the Energy Resources Conservation Board (ERCB)(3). As would be expected, the remaining established reserve profile is consistent with the NEB's data for total Canadian reserves. It is worth noting that 1983 was essentially the first year on record in which reserve additions failed to match production with 1986 marking the fourth consecutive year in which the industry has failed to replace production in Alberta. Over-all, Alberta's remaining established reserves have declined over seven percent since 1982.

Energy Deregulation and Uncertain World Oil Prices: What Are the Connections?

policy changes that are intended to reduce the extent of federal price regulation for crude oil and natural gas in Canada. In this paper, we first examine the likely extent and meaning of deregulation for Canadian oil and natural gas, including the impact on Canada of natural gas price deregulation in the United States. Since these policy changes are being made in an environment of considerable uncertainty about the future level of world oil prices, we use the MACE model to assess the effects of lower and higher world oil prices on the aggregate economy, and on the revenues of the petroleum industry, the governments of the producing provinces, and of the federal government. We also compare these effects under deregulation with those under the modified National Energy Program (NEP) regime, wherein some, but not all, domestic oil prices move to match changes in world oil prices. Finally, we shall use our model results to assess the need for, and consequences of, further changes that have been suggested for energy taxation in Canada, including the modification or removal of the Petroleum and Gas Revenue Tax (PGRT), and some 'standby' system for insulating Canadian energy consumers and producers from the effects of very large swings in world oil prices. For Canadian crude oil pricing, the current pivot point is the regulated price for old oil, since all other prices are determined by reference to it. Producers of old oil receive it directly, while producers of synthetic oil or of conventional oil from pools discovered since 1974, or produced from in-fill drilling of fields discovered previously, receive a supplementary payment to bring their price up to the New Oil Reference Price (the NORP) which has a built-in quality differential linked to the posted price for an equivalent quality of international crude oil. Oil importers receive a subsidy based on the difference between the old oil price and an import reference price, and oil exporters pay an export tax which is set so as to approximate the difference between the old oil price and the US market price for comparable crudes, with adjustment for transport costs in both cases. The basis for the price to Canadian oil users is the old oil price plus the Petroleum Compensation Charge (PCC) and the Canadian Ownership Special Charge (COSC). Under the 1981 Energy Agreements, the PCC was supposed to be adjusted so as to cover the sum of the subsidy payments to users of imported oil and the price supplements paid to producers of new oil, synthetic oil, and other categories receiving higher prices. However, during most of 1984 the required increases in the PCC were not made, and even after the increase in November 1984 there remained a

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

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.

Natural gas deregulation and U.S. ammonia production

Natural gas price deregulation in the United States as scheduled under the Natural Gas Policy Act of 1978 will likely increase domestic industrial natural gas prices by 1985. This increase in natural gas prices will substantially reduce producers' surplus of domestic ammonia producers by raising costs of production at a time of increasing imports and declining growth in ammonia demand. Potential plants exits and changes in producers' surplus and domestic production and prices of ammonia are analyzed under alternative ammonia demand, import, and natural gas pricing assumptions.

The Impact of Natural Gas Price Deregulation on the South Carolina Food-Processing Sectors

The economic distortions that have been caused by federal regulation of natural gas markets have been the subject of many recent studies (Committee for Economic Development [CED]; Brickhill; Hall; MacAvoy and Pindyck; and Means). The most recent policy debate concerns the relative merits of alternatives to the price deregulation schedule of the 1978 Natural Gas Policy Act (NGPA). The range of options runs from freezing natural gas prices at current levels to complete decontrol of natural gas prices by January 1, 1986. Producers of natural gas, pipelines, distribution utilities, and end users all suffer from some sort of economic distortion under the NGPA (CED, pp. 50-60).

Natural Gas Price Deregulation and Windfall Profits Taxation

A form of lump-sum capital gains tax is proposed to serve as a windfall profits tax upon decontrol of natural gas. Its advantages are discussed, a comparison made to the oil windfall profits tax, some revenues estimated, and some potential difficulties in administering the tax outlined. 7 references, 1 table.

THE INCOME DISTRIBUTION EFFECTS OF A NATURAL GAS PRICE INCREASE

Deregulation of wellhead natural gas prices will affect individuals as consumers and resource owners. It is shown that higher natural gas prices will be roughly progressive with respect to household and general consumers. The effects on the distribution of resource earnings will be ambiguous because although the oil and gas industry is highly capital intensive, natural gas price deregulation will likely cause reduced spending on other capital‐intensive activities, including deep drilling for high cost gas, gas utility distribution, and exports. Overall, no clear case can be made that gas wellhead price deregulation will be regressive

A Note on Deregulation of Natural Gas Prices

Deregulation of natural gas prices may have costly ramifications. The effects of redistribution from consumers to producers, macroeconomic impacts, and increased dependence on oil imports are discussed. 16 references, 2 tables.

The impact of price variation on the production of crude oil and natural gas

This paper is directed at examining the impact of changing prices on the level of production of crude oil and natural gas in the United States. By using a cross correlation test for unidirectional causality, it is clearly demonstrated that for both crude oil and natural gas, domestic production is affected by changing prices. The implications are clear. The decontrol of the price of crude oil and the deregulation of natural gas prices will lead to additional production in the near term.

The production of crude oil and natural gas

This paper is directed at examining the impact of changing prices on the level of production of crude oil and natural gas in the United States. By using a cross-correlation test for unidirectional causality it is clearly demonstrated that, for both crude oil and natural gas, domestic production is affected by changing prices. The implications are clear. The decontrol of the price of crude oil and the deregulation of natural gas prices will lead to additional production in the near term.