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Canadian Natural Gas Exports, Domestic Gas Prices, and Future Gas Supply Costs

Exports of Canadian natural gas hasten the day when Canadians must pay higher gas prices. Hence the desirability of exporting natural gas is strongly affected by current and future supply costs. In this paper I analyze the interaction of Canadian gas exports, domestic gas prices, and future gas supply costs using a multitemporal nonlinear optimization model of natural gas allocation. Maximizing the present value of Canadian consumer plus producer surplus and net revenues from export sales, this model allows for the spatial dispersion of gas reserves and domestic markets, the spatial dispersion of U.S. markets, differing recovery profiles for different supply options, and rising marginal costs of conventional gas supplies.

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Energy Specializations: Natural Gas – Markets and Prices; Natural Gas – Policy and Regulation

JEL Codes:
L13 - Oligopoly and Other Imperfect Markets
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General

Keywords: Natural gas exports, Canada, Supply forecasting

DOI: 10.5547/ISSN0195-6574-EJ-Vol8-No2-4

Published in Volume 8, Number 2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.