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The Value of Australia's Natural Gas Resource - A Linear Programing Analysis

Abstract:
Natural gas prices in Australia have evolved from long-term contracts negotiated when energy prices were considerably lower than they are today.' Following the increases in the world price of oil and the Australian government's policy to price new indigenous oil supplies at the world parity price, it seemed that natural gas was being undervalued. A vigorous debate ensued. One side maintained that gas should also be priced on the domestic market to reflect the value of LNG in the world market. A similar view asserted that gas ought to be priced at the energy-equivalent value of crude oil.

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Energy Specializations: Energy Modeling – Other; Natural Gas – Markets and Prices

JEL Codes:
C59 - Econometric Modeling: Other
L13 - Oligopoly and Other Imperfect Markets

Keywords: Natural gas, Australia, LNG, Linear programming analysis, Long term contracts

DOI: 10.5547/ISSN0195-6574-EJ-Vol7-No2-7


Published in Volume 7, Number 2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.