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Market equilibrium models of natural gas markets in North America and Europe

Principal Investigator(s): 


Dr. Steven A. Gabriel and several of his graduate students (Jifang Zhuang, Ph.D. CEE 2005; Supat Kiet, Ph.D. Candidate CEE; Ruud Egging, Doctoral Student CEE) as well as collaborators (Franziska Holz, Ph.D. Candidate TU Dresden, Germany) have developed market equilibrium models of natural gas markets in North America and Europe. These models are based on a Nash-Cournot game theory concept in which market players such as gas producers, traders, or pipelines are individually modeled as solving certain profit maximization optimization problems. In combination with colleagues from DIW (German Institute for Economic Research) and Technische Universität, Dresden, they are expanding this to a World Gas Model (WGM).

Collecting all the optimality conditions for these problems together along with market-clearing conditions, results in a nonlinear complementarity or equilibrium problem. These models have been presented at several international conferences and the work has been supported by two separate grants from the National Science Foundation totaling $512,632. Dr. Gabriel has been the sole PI on both these projects. These models permit regulators, other government agencies and private sector energy companies to see the influence of market power by strategic players in these markets on raising prices as well as determine bottlenecks in the pipeline and other distribution systems such as marine-transported liquefied natural gas.