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Short Run Effects of Bleaker Prospects for Oligopolistic Producers of a Non-renewable Resource

Kristine Grimsrud, Knut Einar Rosendahl, Halvor B. Storrøsten, and Marina Tsygankova

Year: 2016
Volume: Volume 37
Number: Number 3
DOI: 10.5547/01956574.37.3.kgr
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Abstract:
In a non-renewable resource market with imperfect competition, both the resource rent and the current market influence large resource owners' optimal supply. New information regarding future market conditions that affect the resource rent will consequently impact current supply. Bleaker demand prospects tend to accelerate resource extraction. We show, however, that it may slow down early extraction by producers with sufficiently large reserves and thus small resource rents. The reason is that the supply from such producers is driven more by current market considerations than concern about resource scarcity. As producers with relatively smaller reserves accelerate their supply in response to bleaker demand prospects, producers with sufficiently large reserves will reduce their current supply. The surge in shale gas production will reduce residual demand facing suppliers to the European gas market. We demonstrate the effects of this in a numerical model. Most gas producers accelerate their supply while Russia reduces its supply slightly and thus loses market shares even before the additional gas enters the market.



Seasonal Flexibility in the European Natural Gas Market

Iegor Riepin and Felix Musgens

Year: 2022
Volume: Volume 43
Number: Number 1
DOI: 10.5547/01956574.43.1.irie
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Abstract:
This paper focuses on seasonal demand swings in the European natural gas market. We quantify and compare the role of different flexibility options (domestic production, gas storage, and pipeline and LNG imports) to assess European demand fluctuations in monthly resolution. We contribute to the existing literature on seasonal flexibility by addressing the problem with a mathematical gas market optimization model. Our paper provides valuable empirical insights into the decline of gas production in northwestern Europe. Furthermore, we focus on how specific flexibility features differ between pipeline supplies and LNG supplies and between gas imports and storage dispatch. In terms of methodology, we construct a bottom-up market optimization model and publish the complete source code (which is uncommon for gas market models). Furthermore, we propose a new metric—the scaled coefficient of variation—to quantify the importance of supply sources for seasonal flexibility provision.





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