This paper analyzes the role of storage for economies facing the risk of a gas supply disruption. We characterize the optimal/competitive transitory dynamics (accumulation, drainage and target stock). We partially relax the irreversibility hypothesis, by extending the model in two directions: first, we consider a long but finite duration of the crisis, and second, we study the impact of “alerts”. The policy analysis shows that the lack of protection of property rights, e.g. antispeculation measures, is likely to discourage storage completely. Responsible policy involves a series of measures taken ex ante that limit market failure. We provide a method to calculate the social value of a policy.
IEFE WORKING PAPER n.1Gas storage and Security of Supply in the medium run
CRETI', ANNA;
2007
Abstract
This paper analyzes the role of storage for economies facing the risk of a gas supply disruption. We characterize the optimal/competitive transitory dynamics (accumulation, drainage and target stock). We partially relax the irreversibility hypothesis, by extending the model in two directions: first, we consider a long but finite duration of the crisis, and second, we study the impact of “alerts”. The policy analysis shows that the lack of protection of property rights, e.g. antispeculation measures, is likely to discourage storage completely. Responsible policy involves a series of measures taken ex ante that limit market failure. We provide a method to calculate the social value of a policy.
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