Pricing Natural Gas in Mexico: An Application of the Little-Mirrlees Rule -- The Case of Quasi-Rents

Brito, Dagobert L.; Rosellón, Juan
April 2010
Southern Economic Journal;Apr2010, Vol. 76 Issue 4, p1131
Academic Journal
In 1997, the Comisión Reguladora de Energía of Mexico implemented a netback rule for linking the Mexican natural gas price to the Texas price. At that time, the Texas price reflected a reasonably competitive market. There have been dramatic increases in the demand for gas, and there are various bottlenecks in the supply of gas. As a result, the price of gas in Texas now reflects the quasi-rents created by these bottlenecks. We show that it is optimal for the Mexican government to use the netback rule based on the Texas price of gas to set the price of gas in Mexico even though the Texas market cannot be considered a competitive market, and the Texas price for gas reflects quasi-rents created by various bottlenecks.


Related Articles

  • Survey of Natural Gas Shortfall in China.  // China Chemical Reporter;5/6/2010, Vol. 21 Issue 9, p11 

    The article reports on the reasons behind the shortage of supply of natural gas in China. According to statistics, there was a nationwide shortage of 30 million cubic meters of gas a day. Zhang Guobao, director of the National Energy Administration, expressed that there is an imbalance between...

  • Think twice: There's a danger to ditching diesel. Andreoli, Derik // Logistics Management;Aug2012, Vol. 51 Issue 8, p26 

    The article assesses the implications of converting all or part of a fleet from diesel to natural gas. It details the impact of fuel prices on operating costs, and evaluates the key factors that are likely to influence supply and demand for both natural gas and diesel. It is suggested that...

  • VI-SION ( viZH n/). Sweet, Shane // Fuel Oil News;Jul2014, Vol. 79 Issue 7, p26 

    The article offers information on the 2014 VISIONS Conference held in Worcester, Massachusetts in June. Topics of the conference include ultra-low-sulfur-diesel (ULSD) transition, oil prices, and natural gas demand. Among the event participants are James Townsend of Townsend Energy, Philip...

  • Falling Energy Prices Provide Short-Term Margin Boost. Westervelt, Robert // Chemical Week;9/27/2006, Vol. 168 Issue 32, p8 

    The article reports on a decrease in the prices of crude oil and natural gas since early August 2006. Natural gas prices and supply will likely remain volatile, according to analysts. Natural gas sentiment has turned negative due to swelling gas inventories, sharp price declines, and reported...

  • Moody's Lowers Oil Price Assumptions. Fest, Glen // High Yield Report;10/19/2015, p2 

    The article reports that Moody's Investors Service has lowered its price assumptions on natural gas and crude oil in October 2015. Topics covered include the weak demand and oversupply expected to slow the pace of recovering oil and gas prices over the next couple of years. Also mentioned are...

  • Natural Gas Price Picture May Change By Late 2012. Wood, Valerie // Pipeline & Gas Journal;Sep2011, Vol. 238 Issue 9, p16 

    The article presents an overview of the condition of the natural gas industry in the U.S. It highlights the supply and demand of the products on its prices, particularly in Louisiana where a hovering around 4 dollars per million British thermal unit (MMBtu) was reported. It further outlines some...

  • Industry Forecast Scenario.  // China Oil & Gas Report;Q2 2011, Issue 2, p38 

    The article offers economic forecasts on the oil and gas industry in China from 2008 to 2015. According to BP Statistical Review of World Energy, the country's oil reserve for 2009 were 14.8 billion barrel while 2,455bcm of gas. It says that China's oil supply and demand climbed by 12.6% y-o-y...

  • Energy price puzzle. Sabir, Ismat // Energy Update;Aug2012, Issue 62, p10 

    The article offers information on several developments in the gas and energy industry of Pakistan including increase in the prices of petroleum products and compressed natural gas (CNG), new oil and gas discoveries, and energy demand. As mentioned, several business organizations including All...

  • TOO MUCH GAS, BUT PRICES STILL TOO HIGH. Robinson, Simon // ICIS Chemical Business;6/26/2006, Vol. 1 Issue 25, p16 

    The article reports that U.S. federal energy officials has authorized the expansion of private storage facilities for natural gas. Despite the pending glut, however, Federal Reserve chairman Ben Bernanke warned that gas prices are likely to stay high. The Federal Energy Regulatory Commission's...


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics