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Storage and security of supply in the medium run

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  • Chaton, Corinne
  • Creti, Anna
  • Villeneuve, Bertrand

Abstract

This paper analyzes the role of private storage in a market for a commodity (e.g. natural gas) whose supply is subject to the threat of an irreversible disruption. We focus on the medium term in which seasonality of demand and exhaustibility can be neglected. We characterize the price and inventory dynamics (accumulation, drainage and limit stocks) in a competitive equilibrium with rational expectations. We show the robustness of our results to alternative scenarios in which either a disruption has finite duration or the crisis is foreseen. During the crisis consumers may put pressure on the Government to intervene, but too severe antispeculative measures would inefficiently discourage storage. Practical solutions to this dilemma cause welfare losses that we characterize and quantify.

Suggested Citation

  • Chaton, Corinne & Creti, Anna & Villeneuve, Bertrand, 2009. "Storage and security of supply in the medium run," Resource and Energy Economics, Elsevier, vol. 31(1), pages 24-38, January.
    • Handle: RePEc:eee:resene:v:31:y:2009:i:1:p:24-38
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    Citations

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    Cited by:

    1. Giulietti, Monica & Grossi, Luigi & Waterson, Michael, 2011. "A Rough Examination of the value of gas storage," The Warwick Economics Research Paper Series (TWERPS) 967, University of Warwick, Department of Economics.
    2. Creti, Anna & Villeneuve, Bertrand, 2008. "Equilibrium Storage in a Markov Economy," MPRA Paper 11944, University Library of Munich, Germany.
    3. Salant, Stephen W., 2015. "What Ails the European Union's Emissions Trading System? Two Diagnoses Calling for Different Treatments," RFF Working Paper Series dp-15-30, Resources for the Future.
    4. Anna Creti & Bertrand Villeneuve, 2013. "Commodity storage with durable shocks : A simple Markovian model," Post-Print hal-01517436, HAL.
    5. Ejarque, João Miguel, 2008. "Evaluating the Economic Cost of Strategic Storage of Natural Gas," Economics Discussion Papers 8922, University of Essex, Department of Economics.
    6. Ejarque, João Miguel, 2011. "Evaluating the economic cost of natural gas strategic storage restrictions," Energy Economics, Elsevier, vol. 33(1), pages 44-55, January.
    7. Mordwa, Maria, 2011. "The obligation of strategic gas storage introduced in Poland as an example of a public service obligation relating to supply security: a question of compliance with European law," MPRA Paper 34891, University Library of Munich, Germany.
    8. Sergey Paltsev & Valerie Karplus & Henry Chen & Ioanna Karkatsouli & John Reilly & Henry Jacoby, 2015. "Regulatory control of vehicle and power plant emissions: how effective and at what cost?," Climate Policy, Taylor & Francis Journals, vol. 15(4), pages 438-457, July.
    9. Chi Kong Chyong & Michael Pollitt & David M. Reiner & Carmen Li, 2023. "Modelling flexibility requirements in European 2050 deep decarbonisation scenarios: the role of conventional flexibility and sector coupling options," Working Papers EPRG2302, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    10. Abrell, Jan & Chavaz, Léo & Weigt, Hannes, 2019. "Dealing with Supply Disruptions on the European Natural Gas Market: Infrastructure Investments or Coordinated Policies?," Working papers 2019/11, Faculty of Business and Economics - University of Basel.
    11. Cavaliere, Alberto & Giust, Valentina & Maggi, Mario, 2013. "Efficient mechanisms for access to storage when competition in gas markets is imperfect," Energy Economics, Elsevier, vol. 36(C), pages 481-490.
    12. Salant, Stephen W., 2016. "What ails the European Union׳s emissions trading system?," Journal of Environmental Economics and Management, Elsevier, vol. 80(C), pages 6-19.
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    More about this item

    Keywords

    Gas industry Storage Dynamic models;

    JEL classification:

    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy

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