Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/192505 
Year of Publication: 
2007
Series/Report no.: 
Discussion Papers No. 523
Publisher: 
Statistics Norway, Research Department, Oslo
Abstract: 
Reduced transportation costs are usually associated with lower import prices, increased trade and price convergence. In this paper we show that the lower costs can actually lead to higher import prices in some regions, and price divergence between import regions. Using both a general theoretical approach and a numerical model of the global natural gas market, we demonstrate that the price effect from transport cost reductions depend on the relative distances between regional markets, the choice of transport technology, and supply and demand responsiveness in the different markets. Our numerical results suggest that European consumers would generally be better off if pipeline costs are reduced, while North American consumers would be better off if LNG costs are reduced.
Subjects: 
Natural gas
trade
transport costs
price convergence
numerical model
JEL: 
C61
F17
L95
Q31
R40
Document Type: 
Working Paper

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