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After the Natural Gas Bubble: An Economic Evaluation of the Recent U.S. National Petroleum Council Study

Abstract:
This perspective paper reviews and critiques the policy analysis and modeling of future natural gas markets in the National Petroleum Council�s 2003 natural gas study (NPC Study). The NPC Study provided an important and timely review of long-term natural gas supply, demand and potential policies to increase supply or suppress demand. However, its long-term scenarios used assumptions and simplifications that led to understating likely longer-term market reactions to higher natural gas prices, which results in exaggeration of the potential benefits of the policies recommended by the NPC. In addition, the narrow scope of the NPC Study did not address many important considerations in natural gas policy, such as the costs of recommended policies, or their impacts on taxpayers, resource owners, or the environment. Overall, the study does not provide the evidence needed to justify major natural gas policies, especially in view of the current uncertain market environment.

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Energy Specializations: Petroleum – Policy and Regulation; Natural Gas – Markets and Prices; Natural Gas – Policy and Regulation; Energy and the Economy – Energy as a Productive Input; Energy and the Economy –Economic Growth and Energy Demand; Energy and the Economy – Resource Endowments and Economic Performance; Energy and the Economy – Energy Shocks and Business Cycles

JEL Codes:
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General
L13 - Oligopoly and Other Imperfect Markets
O13 - Economic Development: Agriculture; Natural Resources; Energy; Environment; Other Primary Products
Q34 - Natural Resources and Domestic and International Conflicts
F44 - International Business Cycles

Keywords: Natural gas, government policy, US energy markets, National Petroleum Council

DOI: 10.5547/ISSN0195-6574-EJ-Vol26-No2-5


Published in Volume 26, Number 2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.