A Strategic Model of European Gas Supply (GASMOD)

Arbeitspapier

Structural changes in the European natural gas market such as liberalization, increasing demand, and growing import dependency have triggered new attempts to model this market accurately. This paper presents a model of the European natural gas supply, GASMOD, which is structured as a two-stagegame of successive natural gas exports to Europe (upstream market) and wholesale trade within Europe (downstream market), and which explicitly includes infrastructure capacities. We compare three possible market scenarios: Cournot competition on both markets, perfect competition on both markets, and perfect competition on the downstream with Cournot competition on the upstream market. We find that Cournot competition on both markets is the most realistic representation of today?s European natural gas market, where suppliers at both stages generate a mark-up at the expense of the final customer (double marginalization). Our results yield a diversified supply portfolio with newly emerging (LNG) exporters gaining market shares. Enforcing perfect competition on the European downstream market would in positive welfare effects. The limited infrastructure strongly influences the results, and we identify bottlenecks mainly for intra-European trade relations whereas transport capacity on the upstream market is sufficient (with the exception of Norwegian exports) in the Cournot scenario.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: DIW Discussion Papers ; No. 551

Classification and Topics

• Classification: Wirtschaft ; Optimization Techniques; Programming Models; Dynamic Analysis ; Gas Utilities; Pipelines; Water Utilities ; Oligopoly and Other Imperfect Markets
• Subject: natural gas ; strategic behavior ; non-linear optimization ; Europe

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Holz, Franziska ; von Hirschhausen, Christian R. ; Kemfert, Claudia
• Event: Veröffentlichung
• (who): Deutsches Institut für Wirtschaftsforschung (DIW)
• (where): Berlin
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/18444
• Last update: 10.03.2025, 11:41 AM CET