Essays on energy economics research
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In the first chapter, I examine a variety of the factors that affect the price and demand of natural gas. Prior natural gas price research approaches utilized well-defined time series models. I have taken these historical approaches and explored an alternative approach to estimating the model- defined equilibrium market price based on the market clearing condition. Assuming that the natural gas market is a relatively efficient market, the market equilibrium price induced by the model should track the observed market price. A two-step estimation process includes - reduced formed regression estimations for each market component in the material balance equation, and solves for the market balance equation with identified coefficients and parameters for the market equilibrium price. The model results track the market price quite well, in both one period ahead forecasts and a simulated 36 months forecast case. The second chapter in the series "The Game that Drives the LNG Train" analyzes the strategies and decisions of major oil companies’ on selecting regasification terminal sites for importing liquefied natural gas (LNG) along North American coastlines and delivery of regasified gas into regional domestic markets. Each participating firm’s decision is extensive and complex, involving multi-years of capital and human investments. Furthermore, fierce competition exists among firms procuring LNG cargos and servicing the same set of demand areas, i.e. the North America market. This paper will attempt to condense the whole strategy and decision-making process into a simplified multistage model. The model will focus on exploring the strategic elements of decisions for each participant firm in the competition through a game-theory lens. Extending from previous work on tying, the third chapter seeks a more structured result on the relationship of pre-commitment and exclusion due to tying under a Hotelling framework. A three-stage model is set up, which includes a conditional pre-commitment stage and an entry decision stage preceding the third stage of pricing competition. The paper concludes that: first, exclusion is possible even with zero fixed cost, and it is executed by conditional pre-commitment of tying upon entry. Second, conditional pre-commitment of tying only occurs if entry can be excluded, otherwise, tying is not profitable as independent pricing upon entry.