Zhongbing Zhou
China Oil and Gas Centre, No. 18 Fuxue Road, Changping District, Beijing 102249
XiuCheng Dong
China Oil and Gas Centre, No. 18 Fuxue Road, Changping District, Beijing 102249
Jie Guo
China Oil and Gas Centre, No. 18 Fuxue Road, Changping District, Beijing 102249
ABSTRACT
Gordon et al. (2003) tested for subadditivity in the cost structure associated with transporting natural gas by Trans-Canada Pipelines Ltd. and showed that the subadditivity in gas transmission cost was evident and consequently, the possible benefits from increased competition resulting from splitting up the monopoly could be offset by the sacrifice of scale efficiencies. This paper outlined a proposal of natural gas pipeline integration and then justified this proposition applying the theory of economics. Because the natural gas pipeline is of natural monopoly and the up-stream of the natural gas industry in China is of oligopoly competition, separated from the gas producers, the pipeline integration will change the competition equilibrium of the up-stream market. Based on a series of assumptions, this paper conducted an oligopoly competition model of the natural gas market in China, under the framework of which the proposed integration was analyzed concerning the influences this change would bring and thereafter the end of this paper concluded that the pipeline integration is beneficial for Chinese gas producers as well as consumers and helps promote the social benefits as a whole.
PDF References Citation
How to cite this article
Zhongbing Zhou, XiuCheng Dong and Jie Guo, 2013. Modeling and Optimizing the Midstream of Chinas
Natural Gas Industry. Journal of Applied Sciences, 13: 5539-5543.
DOI: 10.3923/jas.2013.5539.5543
URL: https://scialert.net/abstract/?doi=jas.2013.5539.5543
DOI: 10.3923/jas.2013.5539.5543
URL: https://scialert.net/abstract/?doi=jas.2013.5539.5543
REFERENCES
- Baumol, W.J., 1977. On the proper cost tests for natural monopoly in a multiproduct industry. Am. Econ. Rev., 67: 809-822.
Direct Link - Boettke, P.J., 1994. Privatization, public ownership and regulation of natural monopoly. J. Econ. Lit, 32: 1916-1918.
Direct Link - Evans, D.S. and J.J. Heckman, 1984. A test for subadditivity of the cost function with an application to the bell system. Am. Econ. Rev., 74: 615-623.
Direct Link - Fengling, Y., 2005. Inherent monopoly property of gas industry (in Chinese). Nat. Gas Ind., 25: 132-132.
Direct Link - Gordon, D.V., K. Gunsch and C.V. Pawluk, 2003. A natural monopoly in natural gas transmission. Energy Econ., 25: 473-485.
CrossRef