Measuring the effects of natural gas pipeline constraints on regional pricing and market integration

Roger Avalos, Timothy Fitzgerald, Randal R. Rucker

Research output: Contribution to journalArticle

11 Scopus citations

Abstract

Natural gas pipeline capacity sets physical limits on the quantity of gas that can be moved between regions, with attendant price effects. We find support for the hypothesis of integrated regional markets. Using data on daily pipeline flows and capacities in Florida and Southern California, we estimate reduced-form price effects of capacity constraints. We find that pipeline congestion increased realized citygate prices by at least 11% over the mean in Florida and by 6% over the mean in Southern California. We attribute the difference in price effects to more binding capacity constraints in the Florida pipeline network. Our estimates provide guidance for interstate pipeline investments.

Original languageEnglish
Pages (from-to)217-231
Number of pages15
JournalEnergy Economics
Volume60
DOIs
StatePublished - Nov 1 2016

Keywords

  • Market integration
  • Natural gas
  • Pipeline congestion
  • Pipelines

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